Keren Kayemet LeYisrael, under threat from legislation that could see it paying taxes from the beginning of next year, on Thursday said that it would freeze billions of shekels in funding to local authorities and development programs while it assesses the situation.
In a letter to local authorities and other dependent organizations, KKL chairman Danny Atar explained that they could no longer be assured any funding. The move will put on hold some NIS 2.4 billion ($680 million) for various causes. Projects affected include NIS 1.38 billion ($370 million) towards encouraging immigration, NIS 240 ($680 million) for developing the periphery, and NIS 46 million ($13 million) for youth and education programs.
“We are warning all of our partners to these projects that they can no longer rely on the continued support of Keren Kayemet LeYisrael,” Atar wrote. “Professional entities in KKL are carrying out a new assessment in light of the change in the financial situation, and the impact of the future implications for the organization’s budget and the supported projects.”
Atar said that KKL will decide which projects to continue funding after the assessment.
“KKL is working to fight the aggressive and violent Israeli government decision and we hope that the ministers and members of Knesset come to their sense and withdraw from supporting this unfortunate law.”
The development came the day after the Knesset Finance Committee approved the controversial bill for a second and third reading at the Knesset that could be held next week.
The bill is to approve a compromise proposal in tax laws for KKL which will see the organization required to pay taxes from the beginning of 2018, or as an alternative, agree to pay 65 percent of the profits it makes from lucrative land sales during the next two years in return for a tax exemption until 2023.
KKL has said it will file a High Court appeal against the law and that it will sue for the return of NIS 2.2 billion it has already transferred to state coffers. The Finance Ministry has dismissed the threat, saying there is no basis for the lawsuit.
The legislation is backed by Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon.
But the bill has several influential opponents, including Likud’s own Welfare Minister Haim Katz, Agriculture Minister Uri Ariel of the Jewish Home party, and MK Bezalel Smotrich, also of Jewish Home, who serves on the Knesset’s Finance Committee, where much of the wrangling over the bill took place.
KKL is a nonprofit quasi-governmental organization formed in 1901 that focuses on land reclamation, reforestation, and development of periphery communities.
In January State Comptroller Joseph Shapira published a report that slammed KKL as a bloated organization with little transparency that may have mishandled funds and acted out of conflicts of interest.
The bombshell report, the first ever on KKL by the state comptroller, focused much of its attention on alleged conflicts of interest and lack of oversight at the organization’s operational branch, the Land Development Administration.