Coalition seeking to amend Arnona Fund to benefit Likud strongholds – report

New version of the controversial law, initiated by coalition whip MK Ofir Katz, would have certain cities receive from the fund instead of paying millions into it

MK Ofir Katz leads a meeting in the Knesset in Jerusalem, on February 14, 2023. (Yonatan Sindel/Flash90)
MK Ofir Katz leads a meeting in the Knesset in Jerusalem, on February 14, 2023. (Yonatan Sindel/Flash90)

The coalition is reportedly advancing a modified version of the contentious Arnona Fund law that would mitigates its adverse effects on Likud strongholds.

The Arnona Fund was enacted as a component of the Arrangements Law last week, coinciding with the passage of the state budget. The fund will deduct a portion of property taxes gathered from local businesses to be allocated to a fund designed to support municipalities of lower socioeconomic standing. Consequently, the law will disproportionately impact cities hosting prosperous commercial sectors or industrial parks.

The updated version, spearheaded by Coalition Whip MK Ofir Katz, will alter the criteria that ascertain whether a city contributes to or receives from the fund, Ynet reported Sunday. The change implies that cities such as Eilat, Tiberias, Beit She’an, and Yeruham — all known for their strong Likud support — will switch over to the fund’s receiving end, the report said.

Based on Finance Ministry data, the existing fund structure will extract millions of shekels from these cities.

Supporters of the existing fund maintain that the measure will inspire less prosperous municipalities to prioritize residential real estate over businesses, as fund allocation is predicated on the volume of residential construction a municipality undertakes.

They emphasize that although businesses pay more in taxes and are, consequently, more enticing to municipal authorities, the fund’s emphasis lies in fostering the growth of communities located in Israel’s outskirts.

Critics argue that it penalizes communities that have already invested in attracting employers and diverts funds that could be used to enhance services like education and culture.

Hizky Sivak of the Emek Hefer Regional Council is taken out by Knesset guards from a Finance Committee meeting and a vote on the Arnona Fund at the Knesset in Jerusalem, on May 15, 2023. (Yonatan Sindel/Flash90)

They also accuse the coalition of intending to use the funds to fulfill sectorial demands made by coalition partners, including subsidies for the ultra-Orthodox.

They further highlight that settlements in the West Bank are exempted from contributing to the fund. They also critique its design that seems to disadvantage Arab municipalities as Arab townships often struggle to secure residential building permits.

Two weeks ago, several major municipalities went on strike over the fund, closing schools, suspending garbage collection and welfare services.

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