Lawmakers debate controversial 80% tax bill on foreign government donations to NGOs
Likud’s Ariel Kallner says law will ‘preserve’ Israel’s Jewish and democratic character; Hadash-Ta’al MK Tibi counters that it is intended to suppress Arab vote
Sam Sokol is the Times of Israel's political correspondent. He was previously a reporter for the Jerusalem Post, Jewish Telegraphic Agency and Haaretz. He is the author of "Putin’s Hybrid War and the Jews"
Lawmakers in the Knesset Constitution, Law and Justice Committee on Monday began debating a controversial bill that would levy massive taxes on nongovernment organizations funded by foreign governments, and erode their right to file lawsuits in Israeli courts.
The bill, sponsored by Likud MK Ariel Kallner, would allow the government to tax foreign government donations to domestic nonprofits at a rate of 80 percent, while also stipulating that courts need not consider petitions by groups “primarily financed by a foreign political entity.”
If passed into law, the legislation would apply to NGOs that do not also receive Israeli state funding. The finance minister, with the approval of the Knesset Finance Committee, would be allowed to exempt organizations from the new rules “in special circumstances.”
Arguing in favor of the legislation, which passed a preliminary reading in the Knesset plenum in February, Kallner argued that sanctions imposed on violent settlers by the Biden administration “came as a result of despicable blood libels by delegitimization organizations such as Breaking the Silence and others” — adding that between 2012 and 2024, “a little more than NIS 1.3 billion ($360 million) flowed from foreign countries to 83 left-wing organizations, some of which are downright anti-Zionist.”
“This is a psychotic reality that distorts the discourse,” he declared, railing against “foreign-funded legal warfare against the state” by human rights groups petitioning the High Court of Justice.
“The law is not against civil society, but for it, against its distortion,” Kallner asserted. “The law will preserve a Jewish state, preserve democracy, and block illegal foreign intervention.”
Committee chairman Simcha Rothman (Religious Zionism) agreed, claiming that foreign money funded opposition to the coalition’s judicial overhaul agenda, while “the attorney general prohibited the justice minister from using state money to produce public diplomacy [relating to] the reform.”
Groups such as B’Tselem, Breaking the Silence, and the New Israel Fund have long been targeted by the Israeli right and even the political center over their focus on alleged Israeli human rights abuses against the Palestinians.
“When it comes to the Arab public, there is no doubt that part of the legislator’s intention is to prevent campaigns to encourage voting in Arab society,” Hadash-Ta’al MK Ahmad Tibi told the committee.
Accusing Prime Minister Benjamin Netanyahu’s Likud party of seeking to harm Arab political representation, Tibi lamented that the coalition was also working to pass a bill “that aims to make it easier to disqualify Arab lists.”
Last month, lawmakers voted 22-0 to approve the first reading of a bill to disqualify a candidate or list of candidates from running in municipal elections on the grounds that they have denied the existence of the State of Israel as Jewish and democratic, or expressed support for terrorism or armed struggle against Israel.
“If anyone is worried about foreign interference, let them go check past laws to see where the money of oligarchs who support political parties over the years went, and what happened in the Prime Minister’s Office,” declared Yesh Atid MK Yoav Segalovich, alluding to the ongoing Qatargate scandal.
The Shin Bet and police are currently investigating members of Netanyahu’s inner circle over alleged ties between them and Doha as part of the probe. They are suspected of multiple offenses tied to their alleged work for a pro-Qatar lobbying firm, including contact with a foreign agent and a series of corruption charges involving lobbyists and businessmen.
Speaking with The Times of Israel in February, Noa Sattath, the executive director of the Association of Civil Rights in Israel, accused the government of attacking liberal civil society groups while leaving right-wing organizations untouched.
“This proposed legislation is a direct assault on Israel’s democracy and part of the ongoing judicial coup. It represents a systematic attack on all institutions that check government power, and specifically targets human rights organizations working to protect minorities in Israel and Palestinians in the occupied territories,” Sattath said.
“The selective taxation targets only foreign state funding from Israel’s closest allies — including the United States and European Union member states — who support democracy, human rights, and minority protection. Meanwhile, right-wing organizations relying on private donations remain unaffected, and the finance minister has discretionary power to exempt certain organizations, while those receiving state funding are automatically excluded.”
A previous version of the bill was shelved during an international uproar, nearly two years ago.
That proposal, also sponsored by Kallner, did not touch on NGOs’ legal standing, but mandated that any nonprofit group that engaged in public advocacy two years before or after receiving a donation from a foreign government would lose its status as a public institution and would no longer be eligible for tax exemptions, and in addition would be hit with a 65% income tax.
The Times of Israel Community.