Knesset panel advances West Bank settlement tax benefits bill for final votes

By Ariela Karmel

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1 June 2026, 3:16 pm

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Ariela Karmel is a political correspondent at The Times of Israel. She previously reported for Calcalist and Haaretz. She holds an MA in Middle Eastern and African History from Tel Aviv University and a BA in Political Science from the University of British Columbia.

Finance Committee chair MK Hanoch Milwidsky leads a Finance committee meeting at the Knesset in Jerusalem, May 19, 2026. (Yonatan Sindel/Flash90)

The Knesset Finance Committee approved legislation granting expanded tax benefits to dozens of West Bank settlements for its second and third readings, paving the way for final votes in the plenum later today and possible passage into law.

The bill, sponsored by Religious Zionism MK Zvi Sukkot and backed by Finance Minister Bezalel Smotrich, would grant tax benefits to 59 West Bank settlements located east of the security barrier under a new “eastern conflict zone” designation. The Israel Tax Authority estimates the measure will cost NIS 130 million ($46 million) annually.

The government has been highly criticized by northern leaders, opposition lawmakers, and even coalition lawmakers for advancing the legislation while delaying efforts to assist communities in the north of Israel devastated by more than two years of Hezbollah attacks.

A government decision to approve a long-promised NIS 5 billion ($1.78 billion) rehabilitation package for the north, expected to be approved yesterday, was postponed, reportedly due to Smotrich’s insistence that his party’s legislation advance first.

An earlier version of the legislation was amended to include a handful of northern communities located within two kilometers of the Lebanese border, prompting accusations from opposition lawmakers and northern local authority heads that the government was exploiting the plight of northern residents to secure support for a measure primarily benefiting West Bank settlements.

Committee chairman and Likud MK Hanoch Milwidsky had sought to extend the tax benefits to communities within nine kilometers of the Lebanese border, but Smotrich vetoed the proposal. The provision was removed after northern leaders demanded that either all communities within nine kilometers of the border be included or none at all.

“To the residents of the North who are leaving deeply disappointed, I have no clever words to offer. You are right,” says Milwidsky, emphasizing that Smotrich’s decision to block changes to the bill reflects “neither my position nor the position of most [committee] members.”

He adds the government is expected to meet tomorrow to discuss advancing the NIS 5 billion aid package for northern communities, and that he will submit separate legislation on Wednesday to expand tax benefits for residents of frontline communities in the north.