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Economy, Society and Lowering the Cost of Living

 

Economy, Society and the Plan to Lower the Cost of Living

 

Between the years of 2002-2012, the economic growth in Israel was 26.8%. During that same decade, however, the actual increase in the average Israeli citizen's salary was a mere 2.1%. Resources for the Israeli economy were allocated to the higher-pressured political priorities—isolated settlements, yeshivas and awarding benefits to the wealthy—while neglecting the Israeli middle class, which supports the country's economy on its shoulders.

This economic policy widened social and economic gaps, decreased the standard of living of the middle class, exacerbated the plight of the disadvantaged population and increased the number of Israelis living under the poverty line. The principle of trickle-down economics, in which the wealthy are afforded tax breaks and unrestricted opportunities to profit with the expectation that the wealth will trickle down through the middle class to the poor, simply does not work.

Yesh Atid believes in fair economic policy which directs budgetary investments to the middle and weaker classes, closing social gaps while strengthening the market and encouraging growth. By expanding the social services provided by the state—in areas of education, health and welfare—the overall expenses of each household decrease, which leaves more disposable income in the hands of the public. As a result, consumption increases and growth strengthens. For such a model to succeed,  policy must encourage growth, invest in industry, assist small and medium enterprises, promote innovation in the market, fight the black market and strive to put public funds back in the hands of the public. This is the concept behind the budget proposal and economic plan for 2015 formulated by former Finance Minister Yair Lapid. This budget increased investments in social services by more than NIS 10 billion without incurring any increase in taxes.

Lapid had been handed a debt of over NIS 40 billion and a fiscal deficit of 4.5% that was in danger of climbing to 5%. Tax collection was lower than had been projected, housing costs had increased by 80% within six years, food prices were skyrocketing, healthcare costs surging, unemployment stood at 6.5% and the budget for social services had become increasingly slim.

After a year and eight months, when Lapid ended his function as finance minister, the deficit stood at 2.6%, even lower than the targeted goal; taxes collected amounted to NIS 4.4 billion higher than target; unemployment dropped to 5.6%. In the past year, food prices dropped by 3.2%, despite a 2.4% increase in the other OECD countries. Despite Operation Protective Edge—the longest military operation in past two decades, the hefty expenses of which were covered without raising taxes—the economy saw a 2.6% boost, higher than the projections of the Central Bureau of Statistics and higher than the average growth of other OECD countries, which was 1.8%. According to the National Insurance Institute's report, the number of children below the poverty line decreased by 3%.

 

 

Reorganizing Priorities and Narrowing Social Gaps

 

We spearheaded a reorganization of the budgetary priorities that placed the working man at its center. The Israeli middle class, which works, pays taxes and serves in the army, and the weaker classes face a daily struggle for survival. In the 2015 state budget and economic plan formulated by former Finance Minister Yair Lapid and approved in its first reading in the Knesset prior to the government's collapse, we succeeded—without raising taxes—in generating an increase of over NIS 10 billion to the budget for social services, education, healthcare, welfare and internal security. By increasing investment in these services, we can decrease the burden of expenses imposed on parents and provide services in the periphery, which removes the need for its residents to travel to the center of Israel in order to receive medical care, thereby increasing their disposable income. This budget is the result of our handiwork.

We adopted comprehensive plans to resolve poverty in Israel and extract entire sectors of the population from poverty; we led a revolution in the education system; we formulated a plan to ameliorate the public healthcare system in Israel,encourage industry and boost economic growth. We brokered negotiations between employers and the State Employee's Union, which brought about an increase in minimum wage to NIS 5,000 per month. We pledge to work toward applying this same raise to the wages of enlisted soldiers, whose limited living allowance does not cover basic living expenses.

We innovated a number of measures to promote equal opportunities and narrow the gap between the social and geographical periphery in Israel in order to assist the weaker classes: formulating a program to close gaps in the education system; doubling the scholarship fund to benefit an additional 130,000 needy students; implementing the plan to ensure nutritional security and provide meals to schools, welfare institutions and senior centers, as well as doubling their budget; assisting families in crisis; increasing the long-term care allowance for seniors and the disabled in conjunction with the minimum wage raise; and providing participation grants to social services in the local authorities in the level 1-4 socio-economic clusters in the southern region.

We led the gradual implementation of the recommendations of the Committee to Fight Poverty, in which we increased pension payments to the elderly recipients of income support; the Aging with Dignity program to aid the elderly and the “Noshmim Lerevacha” program helps impoverished families acquire tools to pull themselves above the poverty line. We expanded the eligibility for negative income tax grants and executed a national program totaling over NIS 1 billion to assist Holocaust survivors in Israel.

We strengthened the public health system and stability of HMOs and worked toward reinforcing medical care services in the periphery. We led a project to narrow the gap of accessibility of science and technology between classes. We also expanded municipal police forces, increasing the number of police officers, firefighters and prison guards.

We believe that contracted labor brings about a serious violation of fair wages and job security. Therefore, we will work to reduce the phenomenon of indirect employment and transition these positions to ones of direct employment. As a first step, we brought a bill to improve conditions of contracted workers, which expands the benefits for contracted workers in the fields of security and sanitation for all public and regulatory bodies. Included in these benefits is a minimum amount of employment, increased enforcement and providing an option to file administrative claims against the state.

 

Lowering the Cost of Living

 

Increasing Competition in Israel’s Banking Market and Dismantling Industry Concentration

The Israeli banking market is dominated by five banking groups that control over 90% of the market. During the first nine months of the year, their profits reached NIS 5.2 billion. Fees and interest charged by the banks to Israeli households in 2013 reached over NIS 5 billion. The reform to Israel’s banking sector will lead to increased competition in the banking market and reduce concentration in the industry. These measures will result in lower prices in the banking sector, lower fees, deposit and savings accounts that are more beneficial to the Israeli consumer and reduced household expenditure on banking services (currently an average expense of NIS 2,000 per family per year).

Reduction of Banking Fees – We will work to establish an independent internet bank and license the Israel Postal Company to engage in banking services. The former will provide professional banking services that are cheaper and more efficient, since it will operate without branches and with limited human resources. Initial establishment expenses for the Postal Bank will be low, due to the huge advantage of its existing nationwide infrastructure of branches, lowering the cost of the services it provides to its customers.

Reduction of Bank Credit Prices – The Israeli public today pays excessively high credit fees and unnecessarily high interest rates. We will work to reduce the fees by tens of percent by encouraging non-banking entities to issue loans at low interest rates with favorable terms, sparking an increase in competition among banks and lowering credit prices.

 

Lowering Food Prices

Yesh Atid worked and will continue to work to lower the cost of living in the food sector. We will increase the efforts we had started in opening the Israeli food market to competition, reducing the mediation gaps of supermarket chains, encouraging small manufacturers and importers, and lowering food prices in Israel.

Food Imports – We will continue to promote the Cornflakes Reform, which facilitates easier importation of dry goods and opens the economy to significant importation of food products such as cereal, pasta, beans and more, which will increase competition in this market.

Meat and Dairy Market – We will work to open new export markets for local farm produce and provide direct financial support to advance reform of new planning for the industry, and in doing so, match the level of the milk prices in OECD countries.

Fruits and Vegetables – We will set new rules lowering the prices of agricultural products to consumers and ensuring a fair price to the growers to pay for their produce. We will fight the mediation gaps between the farmer and the consumer. We will eradicate the huge gap between the price the farmer receives and the final price paid by consumers in the supermarket.

These measures are part of the many steps advanced within the food industry in order to open the food market in Israel, increase competition and reduce prices. Such measures include the approval of the Food Act, which will increase market competition; the inclusion of white cheese in the products with price regulation; an outline to reduce customs duties on canned tuna; cancellation of the exemption on marketers of wholesale agricultural produce from a binding agreement, in order to reduce the mediation gaps between the farmer and consumer that make the produce very expensive, while maintaining protection for the farmers.

We will continue to lower food prices and reduce the cost of living by opening the Kosher certification market to competition; attracting foreign retail chains in order to increase competition; opening farmers markets at the city outskirts and speeding up procedures for opening a wholesale market.

 

Reducing Costs of Insurance Policies and Pension Plans

Pension

Israelis pay hundreds of millions of shekels every year in pension management fees. A significant portion of the holders of pension and provident funds pay the maximum management fees. This results in a savings loss of about 16%.

•  State Pension Track

The creation of a state pension track for each of the pension funds, which will be the default option and have minimal management fees. This track will be beneficial primarily for the weak employees in the economy, who are currently referred to savings plans with heavy management fees that are not suitable for them. This move will lead to a decrease in prices of management fees for the 750,000 pension holders who currently pay the maximum management fees, thereby increasing their pension benefits by 10-15 percent.

 

•  Increasing Competition through Free Choice of Insurance Agents

Salaried pension holders are free to choose their pension products, but are still required to manage their savings through an insurance agent (“the designated agent”) chosen by their employer. As a result, the pension holder is effectively under the control of the designated agent, who sometimes takes advantage of this position in order to make biased decisions or charge extra management fees. By encouraging competition in the pension sector, the pension holders would be able to compare costs, choose the pension track that best benefits them and reduce management fees on the policy for which they are paying. A government bill to amend the Supervision of Pension Products Law, led by former Finance Minister Mickey Levy and passed its first reading in the Knesset, allows pension holders a free choice of their designated agent.

 

•  Independent Management of Pension Savings

By allowing pension holders to independently manage their pension savings, pension holders can significantly lower the pension management fees on their savings in comparison with the fully managed tracks. Independent management prevents conflicts of interest and interest-motivated transactions that are liable to occur when the institutional investors and controlling shareholders invest the pension holders’ money according to their own sole discretion. Regulations issued by the Ministry of Finance, enabling individually managed savings for all of the provident funds, were transferred to the Ministry of Justice for approval, but were halted.

 

•  Encouraging Employers to Provide Objective Financial Consulting to their Employees

A pension savings is the most significant wealth accumulation for the average person. Most employees do not utilize financial consulting services due to the relatively high one-time cost. We will work to recognize the employer’s expenditure on objective financial consulting for employees as a tax deductible expense in order to encourage the employers.

 

Private and Supplementary Health Insurance Policies

We will stop the double coverage of private and supplementary health insurance policies, which are held by nearly 20% of the public. To do so, we will establish a uniform policy for private insurance policies and create a computerized system to compare prices, allowing each citizen to receive information about the insurance he needs and its cost. We will significantly reduce prices for the benefit of the consumer, resulting in annual savings of approximately NIS 1,500 per insured family.

The reform aims to increase transparency, reduce the phenomenon of double insurance policies and lower the high expenditure on health insurance. It will help ensure flexibility to the policy holders in purchasing the insurance and avoiding payment for double insurance, which occurs among 25% of citizens. In addition, the reform expands the range of possibilities for the citizen when making an informed consumer choice of the services he needs, and only paying for those services.

 

Car Insurance

The total expenditure for compulsory car insurance for a private vehicle reaches a total of approximately NIS 4.5 billion per year. For years, some of the payment was placed in a compensation fund which accumulated huge surpluses. Some of the money accrued in the fund should be used to lower the compulsory car insurance payment by 5%.

 

Home Insurance

We believe in increasing competition by requiring transparency in prices. This can be done with a price comparison calculator to compare prices between home insurance policies from various companies. By doing so, we can bring down the prices of home insurance policies by about 10% per year.

 

Increasing Competition in the Telecommunications Market

The average family in Israel currently pays hundreds of shekels a month for various broadcasting channels to cable and satellite companies, namely HOT and YES. Competition in this market will increase by expanding the broadcasting package and giving the public the option of cheap multi-channeled television and internet television broadcasts.

The move will provide Israeli families with discounted, expanded channel packages, saving close to NIS 250 a month per family. Such a move would stimulate competition between the cable and satellite companies and provide the Israeli citizen a broader range of possibilities than currently available. This is part of the reform taking place at the Israel Broadcasting Authority, along with the historical process to cancel the television tax, which is expected to take effect next year and save each Israeli family an additional NIS 345 annually.

 

The Import Reform

The average family expenditure on consumer products is estimated at between NIS 6,000-11,000 per year. The import reform will yield an average savings per family of between 10-15%. This will occur by adopting a series of measures, including extending the exemption from customs duties to any package worth up to $500 for online purchases; easing the process of personal and commercial import by reducing bureaucracy, removing obstacles and accelerating approvals. The import reform will lower costs for importers, open the market, lead to increased competition in the industry and broaden the variety and alternatives available to consumers.

 

Reducing Prices of Services

Lowering Electricity Prices by about 10% since the Beginning of 2015

The decision made by former Finance Minister Yair Lapid not to raise the tax on coal facilitated the reduction of electricity prices by 10% since the beginning of 2015. Not only will this benefit households, it will also lead to a significant reduction in electricity expenses for industries and help businesses become more efficient, producing and export more, thereby increasing their growth and strengthening their ability to compete in global markets.

 

Elimination of Water Corporations

A committee set up by former Finance Minister Yair Lapid, in collaboration with the Ministry of Energy and Water, recommended eliminating local water corporations. Instead, it suggested establishing a government corporation which would manage the water sector. Implementation of the committee’s recommendations would lower the price of water by an additional 9%.

 

Harmonization of Property Tax

Each local authority in Israel uses its own calculation method to quantify the area for which the property tax is charged, sometimes regardless of the area of the property and the level of service that the residents or business owners receive from the municipality.

Yesh Atid will adopt the State Comptroller’s report from 2014 to set uniform regulations for setting property tax prices. We will work to achieve uniformity in the measurement methods employed for determining property tax, as well as defining rates for buildings used as businesses or studios. Changing the calculation will result in lower property tax rates, as part of the efforts being led by Yesh Atid to reduce the cost of living.

 

Reduction of Prices for Practical Driving Tests

This entails the reduction of prices for practical driving tests by about half of their cost. Following a gradual outline, the previous price decreased by more than half, from NIS 500 to NIS 229.

 

Reduction in Education Expenses

One of the major roles of public education is to make education accessible, available and high-quality for the entire public, as well as to ensure that all students in Israel benefit from a strong, empowering educational system. In order to prevent economic disparities from becoming a predicting factor in a child’s future, we will continue offering an educational service plan for all children in Israel, enabling every child to break through the cultural, social and economic glass ceiling.

•  Extended School Day - Afternoon Schools and Kindergartens

As part of the Ministry of Education’s overall vision of responsibility for the welfare of every child around the clock, Yesh Atid will extend the Summer School program to create “Afternoon Schools.” The school day will end at 16:45 and students will enjoy homework help from personal tutors, a lunch meal, sports and cultural activities given by the Karev Program, and a free extracurricular class.

The program will operate until fourth grade. Payment will be determined based on the socio-economic clusters, in the same format as the Summer Schools.

•  Summer Schools

Thanks to this program, in the summer of 2014, all of the students in the first and second grades across the country – 200,000 students—enjoyed an educational, interactive framework during the summer vacation, offered at a basic cost of up to NIS 450. The parents saved between NIS 500-1,000 per child in comparison with the cost of privately run day camps. In socio-economic clusters 1-3, whose population was classified as belonging to lower socio-economic levels, the Summer Schools were offered free of charge. This enabled children from families with financial difficulties to enjoy summer vacation like any other child in Israel. The program was slated to expand gradually, including the third and fourth grade students beginning in the summer of 2015. By 2016, the program would be fully implemented to provide a solution for all students ranging from compulsory kindergarten up until fifth grade.

•  Textbook Borrowing Project

The financial burden involved in purchasing textbooks weighs heavily on parents, deepening social gaps and affecting equal opportunities for students in the educational system whose parents cannot afford the expense required to adequately provide for their children. In light of this reality, we expanded the textbook borrowing project. Today, it successfully operates in about 1,500 schools across the country. Approximately NIS 35 million were invested in the project, saving parents between NIS 280-1,000 per child (NIS 280-700 for parents of elementary school students, NIS 320-1,000 for parents of high school students). This step provides an equal opportunity for all students to acquire all their required textbooks while significantly reducing the economic burden placed on parents. In addition, the program helps reduce disparities, encourages the students to develop a sense of responsibility for their property, contributes to the environment and strengthens the relationship between students and the community.

•  Free Textbooks

Former Education Minister Shai Piron led another initiative to reduce parents’ spending on textbooks through the acquisition of rights to use digital textbooks, the costs of which amount to a mere 40% of the cost of standard textbooks. This project was advanced simultaneously with the ICT Program based on the Cloud Computing Approach promoted by the Ministry of Education, which emphasizes learning using tablets and personal devices.

•  Advancement of the Construction of 400 Price-Controlled Daycare Centers

Price-controlled day care centers save young couples an average of NIS 1,000 per month. The government decision to promote their construction was made in 2012, though the actual implementation of this decision was later stopped. We reignited the process, including granting full funding for the local authorities willing to advance construction of price-controlled, supervised daycare centers for approximately 30,000 children between the ages of 0-3. Local authorities who promote accelerated construction procedures during the current year will receive full funding from the Treasury, without matching.

The increase in daycare centers will be part of Yesh Atid’s plan to broaden the Ministry of Education’s responsibility for all children, from the age of zero until maturity. This is to encourage parents of small children to go to work, to reduce educational expenses for parents of toddlers by hundreds of shekels a month and to enable more young mothers to go out to work knowing that their earnings do not go directly to their childcare providers.

•  Cancellation of the Mandatory Psychometric Examination

A step aimed at increasing the accessibility of higher education to the general public, while simultaneously saving families up to NIS 10,000. Acceptance to universities and colleges will be based on the new high school matriculation certificate, which will serve as the primary entrance criterion to institutes of higher education for a wide range of departments. In addition, the top five students from every school in the socio-geographic periphery may be admitted to institutes of higher education without any additional admissions process.

 

 

Employment

Encouraging Ultra-Orthodox Integration in the Labor Market

Increasing participation in the labor market was a central policy goal set by Yesh Atid in the 19th Knesset. We were able to further this goal through a number of measures that brought about real change in integrating populations that had been previously absent from the job market.

 

•  Equal Sharing of the Burden Law

This impetus for economic growth enabled thousands of ultra-Orthodox to enter the labor market and become productive citizens. Since the enactment of the Equal Sharing of the Burden Law, ultra-Orthodox employment demands witnessed a steep increase, transforming publicly supported populations into powerhouses for economic growth.

 

•  Establishment of Career Counseling Centers

In order to aid the integration of unemployed populations into the workforce, career counseling centers were established throughout the country.  The plan invested about NIS 500 million spread over the course of five years. We plan to expand the centers, which are run by the local authorities, so that they can provide counseling, beginning at the initial guidance and training stages for various professions all the way up to the stage of placement and encouraging employers to absorb the new workers.

 

•  Encouraging Employment in the Periphery

The best way to increase employment opportunities is by encouraging the establishment of small and medium businesses and quality employment sources, such as in the fields of high-tech, biotech and research. The combination of support for small and medium businesses along with a significant growth of quality employment opportunities is the most effective way to combat unemployment and poverty while narrowing social gaps. In doing so, we can promote growth in the periphery, aid in the creation of new jobs and halt the damaging emigration from the periphery to the center, a trend primarily resulting from a limited employment environment.

 

•  Reinstituting the Criterion of Exhaustion of Earning Capacity as a Condition for Receiving Benefits

A change in the criteria for eligibility for affordable housing encourages participation in the workforce, benefits working couples and is more advantageous in its criteria to the middle and weaker classes. The criterion of exhaustion of earning capacity is a central determinant in designating eligibility for affordable housing. Along with this, we eliminated the criteria of marriage seniority, which created a blatant bias in favor of the ultra-Orthodox sector. We will work to apply this criterion as a condition for qualifying for additional benefits, such as property tax discounts or reduced daycare costs.

 

Assistance and Encouragement for Small and Medium Businesses

Small businesses account for 99% of registered businesses in Israel, contributing nearly half of the economy's GDP and employing about 69% of employees in the private sector. They are spread over the entire country and support the periphery on their shoulders. Through them is the most constructive way to curb unemployment and poverty while closing social gaps. They are the real powerhouses of the market. We set in motion a long series of steps that benefit small and medium businesses in Israel and we will continue promoting these policies to their advantage. An in-depth explanation of this plan can be found in the section entitled Small and Medium Businesses Platform.

 

•  Tax Breaks for Small and Medium Businesses

We approved the cash VAT law, eliminated joint tax calculation for married couples working under the same employer and reduced the expected increase in employers' tax.

 

•  Promotion of Small and Medium Businesses

We doubled the state-guaranteed loan fund for small businesses, encouraged investment in young companies, provided capital funds for industrial growth, granted direct state credit and increased guarantees for exporters.

 

•  Improving Accessibility to Government Tenders

We dealt with the pay ethic of the state toward its suppliers, expanded the participation of small and medium businesses by offering government tenders and improved accessibility to information and transparency in those tenders. We also instituted a plan of affirmative action for small and medium businesses in the periphery with government tenders.

 

•  Reducing Bureaucracy

We shortened the registration process and the reduced the amount of time it takes to open a business file in Israel while easing the process of online filing. We also eased regulations on regular food imports and provided guidance and support for encouraging entrepreneurship.

 

•  Reducing Social Rights Discrimination Against Small and Medium Businesses

We promoted the the independent worker law, assigned unemployment insurance to the self-employed, provided compensation when closing a business, increased compensation to the self-employed for reserve payments and the equalized maternity payments to self-employed women.

 

Promoting Industry

Israel's industrial growth rate, which relies mainly on exports and global markets, has dropped dramatically ever since the global crisis. Aside from the blow this delivered to economic growth, we also witnessed a reduction in the rate of recruitment for new industrial workers. A similar reduction surfaced in the high-tech sector as well.

Yesh Atid believes in policy that encourages industrial growth while limiting the burden of regulations, which would boost competitiveness of Israeli industry in the global markets and perpetuate the innovation-based economy of Israel. Therefore, we will continue to implement the decision that was accepted by the socioeconomic cabinet headed by former Finance Minister Yair Lapid to improve governmental bureaucracy. We will ensure that all government regulators work to significantly reduce bureaucracy, which is oftentimes outdated and cumbersome for the citizens who encounter it.

 

•  Increasing Guarantees for Exporters

Yesh Atid believes that one of the government's obligations is to provide exporters, who comprise a significant portion of the Israeli economy, with the most favorable conditions and support as possible. The expansion of the ASHRA fund, which grants guarantees to exporters for exporters' business insurance, was promoted by former Finance Minister Yair Lapid in the framework of the 2015 state budget and economic plan. This fund helps exporters expand their operations, manage international competition and the dollar's low exchange rate, and continue to drive Israeli industry forward.

 

•  Encouraging Investment in Young Businesses

In order to preserve Israel's relative advantage in the fields of knowledge-intensive industries, we instituted an amendment to the Angels' Law that would encourage investment in young high-tech companies. This is done by offering tax incentives that would help young companies develop innovative ideas that would enable them to establish themselves as large companies in the market. This process aims to increase the amount of capital available for investment in start-ups. The amendment was passed within the framework of the 2015 economic plan as part of the growth boosters for the economy.

 

•  Industrial Growth Capital Funds

As part of the 2015 budget, former Finance Minister Yair Lapid promoted the establishment of two investment funds for medium businesses. These funds, totaling NIS 300 million and NIS 450 million, will help small and medium businesses expand and break into new markets, while encouraging investment in medium industrial businesses by government participation in the investment risk. Each fund will share equity between institutional and private investors, as well as fund managers and the government.
 

•  Promotion of Connecting Factories to Natural Gas

We will help connect factories to natural gas, a move that will reduce their energy consumption costs and help them grow, increase their number of employees, lower the cost of living and boost their competitiveness in global markets. We doubled the budgets for grants that would assist factories in their transition to natural gas while allocating larger grants to smaller factories. At the same time, we innovated a solution with the Public Works Authority and Israel Railways to resolve the structural barriers that had prevented these factories from connecting to gas. We will continue to work toward resolving any and all bureaucratic obstacles that standing the way of industrialists, including those in the periphery, to facilitate the connection and transportation of natural gas, thereby bringing about a significant reduction in industrial expenses.

We will work to establish an inter-ministerial team, which will include all of the relevant governmental functions, for the purpose of connecting factories in the center and the periphery to natural gas. It will also serve as an informational resource to educate factory owners about their rights and inform them of the breaks to which they are entitled. This will ensure than any factory that so desires will be able to connect to natural gas in a manner that is quick, easy, straightforward and free of unnecessary bureaucracy.

 

•  Reinstating Vocational Education

Recent years have seen a shortage of skilled technological professionals. About 80% of industrialists in Israel report that they experience difficulty recruiting professionals. This is primarily due to the dearth of appropriate training frameworks and the diminishing of vocational education in the past three decades. In order to create the type of trained manpower that the industry demands, former Education Minister Shai Piron allocated approximately NIS 70 million to increase the budget for technical colleges, with 70% invested in technological education. In partnership and coordination with the Manufacturer's Association of Israel and the relevant trade unions, we built a plan to overhaul five existing schools and turn them into vocational schools in the fields of automotive technology, construction, hotel management and welding. We also established four training centers focusing on construction, hotel management, welding and agriculture.

 

Returning Public Funds to the Public

Nationalization of the JNF

Yesh Atid plans to nationalize the Jewish National Fund and return these public lands and funds to the public purse. Instead of using the money in a corrupt manner, we will use it for education, health and welfare, as well as increasing the housing supply.

The JNF was established as an organization whose purpose was the acquisition of land in the land of Israel in the name of the Jewish nation and on their behalf, as there was no Jewish state at the time. Even after the founding of the state, the JNF continued to hold its powers, despite the fact that there was no longer justification for its existence. Since 1961, management of the lands, preparing them for construction and development, and marketing are handled by the Israel Lands Authority, which collects management fees from the JNF. Every year, the government transfers more than a billion shekels to the JNF for its land leasing revenues, on top of JNF’s other income, which includes donations.

Yesh Atid will initiate a historic step to return the state lands and the public funds to the Israeli citizens. On the first day of the formulation of the 20th Knesset, Yesh Atid will present a bill to amend the JNF Law to the Knesset table. This will propose a plan to nationalize the JNF, return it to the public, and convert it to a government company required to operate with full transparency and subject to regulatory obligations, including supervision by the State Comptroller.

Nationalization of the JNF will take place while preserving the projects that serve its purpose, including protecting the forests, hiking trails and bike paths, supporting settlement in the Negev and the Galilee, the planting project, parking lots for picnickers, river rehabilitation, and assistance in agricultural research and development.

Nationalization of the JNF will enable:

1. Subjecting the JNF to the Budget Law, a move expected to bring an additional billion shekels per year to the state treasury and ease the tax burden on the public.

2. Returning state lands to the public – Rapid development and marketing of the lands (2.35 million dunams, approximately 11% of the state lands), while preserving the green lungs and forests, will facilitate launching new construction of an additional tens of thousands of housing units in areas of high demand, while lowering housing prices.

3.  Returning billions of shekels from the JNF to the public – Making possible projects such as a longer school day throughout the country, reinforcement of hospital emergency rooms and fighting poverty.

4.  Implementing transparency and preventing corruption – Ensuring proper administrative practices and limiting the inflated senior management echelon, committing to transparency, subjecting to the State Comptroller and fighting the unjustified inflated system.

 

Releasing the Trapped Profits of Large Companies

One of the measures taken to reduce the deficit and help the Israeli economy recover was tax collection from trapped profits. As part of this move, the large corporations, including Teva, Check Point and Israel Chemicals, paid taxes on their trapped profits totaling NIS 4.5 billion. These funds were sent to the state fund and earmarked for social purposes. The success of the initiative added NIS 4.5 billion to the state income in 2013.

 

Limiting Executive Pay on the Capital Market

As part of the effort to reduce wage gaps in the economy, we promoted legislation aimed at curbing and reducing salaries of executives in financial institutions that manage public funds. The bill, called the Remuneration of Position Holders in Financial Institutions, was intended to curb the salaries of the executives in the financial industry by stipulating that expenses for salaries exceeding NIS 3.5 million a year would not be tax deductible.

This bill includes a detailed mechanism for approving salaries exceeding NIS 3.5 million, reducing the possibility of a conflict of interest and stipulating that salary remuneration exceeding the ceiling would require the approval of a remuneration committee, the board of directors and a general meeting. In addition, the law would require the consent of a majority of the external or independent directors on the board of directors. Regarding a financial institution which is also a public company, approval of salaries exceeding the ceiling would be conditioned upon the approval of a supermajority among the minority shareholders. For control and enforcement purposes, the law would require that financial institutions report any position holder or employee whose salary expenses exceed NIS 3.5 million.

This proposal was halted due to the Prime Minister’s decision to dissolve the government and call for early elections. However, the very promotion of this issue led to self-limitation policies imposed by the financial institutions themselves, refraining from approving excessive salaries for executives at their institutions.

 

Regulation of Debt Arrangements on the Capital Market

Between the years 2008-2011, there were 94 debt settlements in the bond market at an astronomical total sum of NIS 21 billion. Former Finance Minister Yair Lapid declared a war on “haircuts,” which constitute a misappropriation of public funds, and established a committee to examine the procedures for preparing debt arrangements on the market, led by the Executive Director of the Ministry of Finance. This aims to stop the automatic haircuts method, which took place without supervision or transparency, at the expense of our pension funds.

The committee’s role was to set clear parameters to regulate the manner in which all of the involved parties function and to enable correct debt pricing. The committee created new rules for the credit market and the treatment of companies facing difficulties, aimed at creating a situation in which all parties—the company, creditors and the other stakeholders in the company—are certain of the treatment process for failure to repay debt. Reinforcing this certainty will ensure optimal functioning on the part of all of the market players at all of the various stages of credit management. In addition, the committee formulated recommendations relating to the credit allocation stage and pricing. The rules address improvement of the credit management process and the reduction of associated expenses. The committee also stipulated that a debt manager be appointed and granted broad authority.

Implementation of the recommendations was meant to bring about a fundamental change in the credit market in Israel, more efficient credit allocation, more correct debt pricing, protection of the savings and deposit fund holders’ money managed by the financial institutions, and bolster public faith in these systems. However, it was halted due to the Prime Minister’s decision to dissolve the government and call for early elections.

 

Reducing Concentration and Stimulating Competition in the Economy

Approval of the Food Law

The Food Law, based on the conclusions of the Kedmi Committee, addresses the structural problems and barriers that led to market conditions that place a high price burden on Israeli consumers. The law will save households thousands of shekels a year on food expenses. The Food Law helps increase competition in the food industry, which is characterized by high concentration and high prices in comparison with international standards. Healthy and fair competition will help lower prices in the food market, help small suppliers and lower the cost of living.

The law increases price transparency at the supermarket chains by requiring the chains to advertise their current prices at every branch on the internet. This step enables the development of price comparison websites to compare prices at the supermarkets in the consumer’s region based on the consumer’s personal shopping cart. In addition, the law reduces the high concentration of supermarkets in one geographic location, a situation which pushes away competitors from that location and reduces competition. The new law prohibits supermarket chains that dominate a particular area from opening additional branches in that same area without the authorization of the Antitrust Commissioner. Finally, the law promotes competition by regulation of fair competition in the food sector and promoting small suppliers.

 

Approval of the Concentration Law

We promoted the approval of the Concentration Law, which changes the economic ownership structure and dissolves the pyramid control structures, in order to change the balance of powers in the economy, help medium businesses break the glass ceiling and weaken the well-connected powerful entities in favor of the regular Israeli citizen.

The bill requires the government to consider economy-wide concentration considerations and sector-wide competition considerations when allotting rights. In addition, the law sets rules to limit control in pyramid structured companies, limiting the control pyramids to two layers only and separating financial institutions from real institutions.

 

The Ports Reform

Former Finance Minister Yair Lapid, in collaboration with the Transportation Minister, led the ports reform, under the framework of which two new ports will be opened in Haifa and Ashdod. The establishment of these two new ports in the north and the south will encourage competition, leading to price reductions and lowering the cost of living.

The construction and operation of the new ports is a necessary process to move the Israeli economy forward. It is essential for adapting Israel’s sea ports to the needs of the developing international shipping market. The initiative will increase competition between the existing ports and the new ports, leading to lower import transport prices, which will manifest in the form of lower prices for the consumer and lower export prices. This will enable more small and medium businesses to increase their competing capabilities in world markets and increase their export.

 

Combating Black Market Capital

In addition to the lawful and declared economic activity, Israel's shadow economy turns over an immense amount of black market capital that is untaxed. Black market capital in Israel is estimated to comprise between 19.5% (according to a 2013 study by Visa) and 23% (according to a 2006 study by the World Bank) of the GDP. Based on these estimates, Israel's shadow economy amounts to a staggering value of NIS 190 to NIS 239 billion. By comparison, the shadow economy of Western Europe is estimated at only 7% - 16%.

According to the research conducted by the Tax Authority, which examined the tax years between 2006-2010, at least 40 private companies (a number which is about one third of the private companies active in Israel) consistently evade taxes, in violation of the law. These findings exposed the broad extent of black economy in Israel and the incompetence of the Tax Authority to fight this widespread phenomenon. This phenomenon carries alarming implications for the public, manifesting in the state budget. The state budget is determined by numbers derived from taxes collected by the Tax Authority, which fulfills about 75% of the state budget.

Former Deputy Minister of Finance, Commissioner (retired) Mickey Levy, was appointed to manage the Tax Authority's battle to minimize the phenomenon of black market capital in Israel and enforce tax collection. Levy's efforts yielded the addition of 400 investigation and enforcement positions in the Tax Authority; an upgrade to the tax collections's computer systems; a significant expansion of the budget for the computing unit; and the establishment of a roundtable of representatives, which incuded members of the Israel bar Association, tax consultants, accountants and the Lahav organization for small and medium businesses. Law enforcement agencies, headed by the Ministry of Justice and the Israel Police, became involved as well in order to conduct joint operations. In addition, a bond was reinforced between the staff and the tax unit. A move to require lawyers and accountants to identify their clients was instated in order to prevent money laundering by examining money's sources.

Levy's series of measures and operations yeilded sums of collected taxes in 2014 that exceeded the targeted goal of NIS 4.4 billion. This vast sum of money, which was added to the state budget, enables a significant expansion of the social services provided to the public.

At the same time, we furthered significant legislature in the areas of taxation while strengthening the Tax Authority and reducing the bureaucracy experienced by citizens. This was due to the Law on Changes, which requires service providers to report large sums of money, thereby blocking a central pipeline through which money laundering occurs. Alongside this, Israel signed on international agreements to share information and renewed regularization of rules governing foreign trusts, Israeli companies that are registered overseas, family enterprises, handling of complex tax plans, the introduction of detailed reporting requirements and more. Another measure that moved forward was the voluntary disclosure procedure, which enables an individual who failed to faithfully pay taxes to retroactively file past income and pay full taxes on it without facing any penalties, in the event that penalties have not yet been imposed.

Additional steps advanced by former Deputy Minister Mickey Levy, which were intended to make even more progress in the battle against black market capital, came to a halt with the Prime Minister's decision to dismantle the government and call for early elections. Yesh Atid will continue to advance these types of measures in the next Knesset, including the signing of a modern wage agreement with employees of the Tax Authority, the addition of 600 new jobs at the Tax Authority, bringing in an advanced computing system in the form of the BI automated processing service in order to streamline labor efficiency and supervision, implementation of the government's decision to limit the use of cash based on the Locker Commission report, criminalization of serious civil tax offenses by enacting amendment 220, and the transfer of critical information from the Money Laundering Prohibition Authority to the Tax Authority.

 

Government Companies

Removing Political Appointments from Government Companies

Former Finance Minister Yair Lapid initiated the establishment of the Directors Team, a professional, experienced database of directors, chosen after passing rigorous professional examinations out of tens of thousands of candidates. Appointments to the boards of directors of the government companies will be made from this approved database, a standard that ensures transparency and uniformity in the screening and appointment process.

The move ensures that the government companies will be managed professionally; it will improve the performance of the government companies, cutting the Gordian knot between politicians and the well-connected and well-linked.

 

Minority Public Offerings in Government Companies to Promote Increased Transparency

In order to refrain from imposing additional taxes on the Israeli middle class, despite the heavy pressure from the Prime Minister and the Bank of Israel to do so, alternative budgetary resources were identified in the 2015 budget formulated by former Finance Minister Yair Lapid. One of the solutions found is minority public offerings in government companies. This would be executed according to a multi-year program, to be advanced gradually. It is expected to add approximately NIS 15 billion to the state fund.

The anticipated income from the implementation of this plan would considerably reduce the national debt and contribute significantly to the development and reinforcement of the Israeli capital market. This would occur following an influx of funds to the capital market as well as to pension and provident funds, and by the entry of large, stable companies. Simultaneously, implementation of the plan is expected to improve the performance of the government companies and the service they provide to the public, increasing transparency in the decision making process and organizing the regulatory environment in which they operate.

This initiative would revolutionize the system, transforming the government companies into more efficient, successful and independent institutions. This is another step toward stopping the politicization of companies, reducing corruption and deepening proper administration. However, it was halted due to the Prime Minister’s decision to dissolve the government and call for new elections. We will continue to promote it in the next Knesset.

 

Natural Resources

Implementation of the Conclusions of the Sheshinski 2 Committee's Report

Former Finance Minister Yair Lapid set up a committee to examine the relative share received by the state as a result of the use of Israel's natural resources and create a fairer mechanism for the management and taxation of profits earned from these public resources, since the public has a right to benefit from these gains as well.

The primary conclusions recommended by the committee headed by Professor Eytan Sheshinski included: levying a higher gains tax on natural resources, which would raise the portion received by the public to 46%-55%; imposing a uniform 5% royalty on all natural resources, excluding gas and oil, adjusted to the global rate; and establishing a body that would collect royalties and oversee the Tax Authority's transfer prices, ensuring that profits earned from these resources do not get passed along to other industries and instead end up in the hands of the public. The committee found that the current structure of the taxation system for natural resources in Israel does not confer a fair share of the profits to the public.

Taxes paid to the state for the use of natural resources will enable an expansion of the social services provided to Israeli citizens and will reduce the cost of living without having to raise taxes, which are increasingly burdensome on the middle class. This is the first step in a broader process of taking control of the proceeds from natural resources and putting it back in the hands of the public. The implementation of all these steps would have poured an additional NIS 400 million into the state treasury annually, funds that would have been invested back into the public in the form of better quality and more expansive social services while alleviating the cost of living. The enactment of the committee's recommendations was brought to a standstill following the Prime Minister's decision to dissolve the government and bring about early elections. We will continue to work toward advancing and implementing these recommendations.

 

Ensuring the Public's Share in Natural Gas Profits

Former Finance Minister Yair Lapid worked to ensure that the profits earned from Israel's natural resources, particularly the export of natural gas, would be used to improve welfare and social services provided to the public. A special team was established within the Finance Ministry for the purpose of developing a formula to make the most of the tax levied on the sale of natural gas in order to ensure that the public receives its full share in natural gas export transactions.

This amendment was devised for the purpose of ensuring that the public receives its full share of Israel's natural gas profits while creating an environment that supports development in the natural gas industry. However, the legislative process was not completed due to the Prime Minister's decision to dissolve the government and call for early elections.

 

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