The proposed Arrangements Law contains changes that could have a pronounced impact on Israelis’ everyday life.
Moti Bassok Jul 04, 2016 5:12 AM

All the country’s trucks running on cheaper, cleaner natural gas, hundreds of millions of shekels poured into public transportation projects and new light rail lines, and multinational tech companies setting up headquarters in Israel.

Those are some of the ambitious plans contained in the Budget Arrangements Law for 2017-18, the legislation that accompanies the budget itself and serves as a platform for some of the government’s biggest reform initiatives.

The proposed Arrangements Law contains a host of micro-reforms, but also changes that could have a pronounced impact on Israelis’ everyday life.

One, for instance, would allow sherut taxis (which take a full complement of passengers between locations) to charge each rider a separate bill, instead of a collective bill as they are now required to do. Since many riders want to expense their travel, the rule has deterred people from using the sherut, raising costs for those who do.

Finance Minister Moshe Kahlon presented a draft of the budget and Arrangements Law last week in a forum of 20 top officials. He and Prime Minister Benjamin Netanyahu agreed in the spring to a two-year budget even though many economists say it gives the government little flexibility to adjust fiscal policy to changing economic conditions, but politically a single budget covering 2017 and 2018 will spare the coalition one of two wrenching budget debates.

Officials have still not decided on the size of the deficit. Under the law, the deficit is supposed to be no more than 2.5% of gross domestic product in 2017 and fall to 2.25% in 2018, targets that would leave the budget makers facing a massive fiscal gap of as much as 15 billion shekels ($3.9 billion). Netanyahu and Kahlon want to raise the targets to 2.8% in 2017 and 2.5% in 2018 while keeping the targeted rise in spending to 2.7%.

As a result, the cabinet will not debate either the budget or Arrangements Law this month, as is traditionally the case, but sometime in the first half of August – a timetable that has angered many officials.

Sources said Netanyahu and Kahlon will probably get their way on the deficit-target hike, which would reduce the hole by 4 billion shekels and will raise projected tax revenues by up to 6 billion shekels. They said no tax hikes are likely in the 2017-18 budget.

Massive investment in public transportation, mainly in the big cities of Jerusalem, Tel Aviv and Haifa, is the centerpiece of the Arrangements Law. Billions of shekels will be spent on projects, including expanding the light rail system in Jerusalem and adding new lines to the system now being constructed in Gush Dan.

To make more use of Israel’s abundant natural gas reserves, the legislation also calls for all the trucks plying Israel’s roads to run on natural gas instead of gasoline within five to seven years. That will require a network of natgas filling stations. Other plans call for factories and hospitals to use natural gas, too.

Taking advantage of an initiative by the Organization for Economic Cooperation and Development, the Arrangements Law also contains provisions to encourage multinational high-tech companies to domicile in Israel.

The OECD is cracking down on companies headquartering themselves in tax shelters, like the Virgin Islands. As companies are forced to relocate, Israel’s status as a global tech center should encourage many of them to domicile themselves in Israel if the legal and regulatory framework is in place. The result would be extra tax revenues for the government.

Other parts of the Arrangements Law attack the high cost of living. One piece of legislation would allow importers to bring in products without first getting an explicit approval from the government’s Israel Standards Institute – a practice that often delays products arriving in Israel and sometime blocks them entirely, and boosts their cost.

Treasury economists say the law, which would cover home appliances, could lower prices in a market worth 16 billion shekels annually. The law aims to squeeze further savings by opening standards approvals to competition by letting private labs compete with the Standards Institute.

Another reform would concentrate all the procedures for registering a new business in a one-stop procedure, saving applicants visits to 10 different entities, as is the case today.

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