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Part Five - The Economic Plan
Israeli Industry and Trade
In order to allow fulfillment of the economic potential of the economy, the state must remove its hands as much as possible from interfering in the economy in general and in businesses in particular. Today, Israeli policy makes business activity within its domain difficult by means of high and unequal taxation of companies and through exceptional regulatory and bureaucratic obstacles. Zehut will change this situation and turn Israel into a desirable destination for investment and business activity, using the steps outlined in this chapter.
Reducing the corporate tax
Corporate tax, which affects tens of thousands of businesses in Israel and keeps away foreign companies interested in investing here, constitutes a major obstacle to economic growth, employment and general welfare of the country. Zehut will act to lower it to a level that will prevent damage to Israeli companies, and the State of Israel will become an attractive destination for foreign companies and investments.
Zehut will lower the corporate tax across the board, transparent and equal for all types of companies in the country. It is not the role of government to choose which sectors should win or lose; it is not the role of government to favor exports over imports or hi-tech over traditional industry. We will not discriminate between sectors or interest groups either for good or for ill. The Investment Encouragement Law, which essentially gives tax breaks to companies of a certain type, will be eliminated.
In the first phase, we will reduce the corporate tax across the board to 18%. In the second phase, we will strive to reduce the tax rate to 12.5%[1]. Streamlining the budget, along with the economic boost the economy will receive from a dramatic reduction in corporate tax, will actually increase the general tax receipts to a level which will enable us to significantly reduce the income tax rate.
The state will not try to steer the market
The state must avoid investing in development projects or certain areas it is interested in promoting. When the state chooses to allocate resources to a specific area or a particular company, it can be assumed that the state will execute it less well than if it had been executed by private investers within the framework of the free market. The state lacks the knowledge and motivation that private investors have. Its involvement in industry investments is liable to cause not only the direct damage of loss of resources invested in the wrong way, but also the indirect damage of preventing those resources from being used for for worthwhile investment initiatives. Additionally, such involvement opens the door for lobbyists and cronies to influence the decisions of elected officials, so that the decisions that are made are liable to be influenced by extraneous considerations. This is an invitation to thieves.
Zehut will prohibit the granting of benefits, incentives and grants from the state to certain companies. Just as all companies in all areas will pay the same corporate tax, they will be equal in the eyes of the state on all other ways. The state will not favor one company over another. Only in this way will it be possible to ensure that the market will indeed be free, competitive and free from the influence of extraneous considerations.
Government bodies whose role is to assist developers or to encourage industry will be closed. Attempts by the government to encourage growth through market interference usually only slow it down, so we must shut down the bodies engaged in this. Among the organizations that will be eliminated are the Export Institute, the Innovation Authority (formerly the Chief Scientist), the Small Business Authority, the Ministry for Enterprise, technological entrepreneurship incubators, and others.
The powers of the Economy and Industry Ministry will be cut accordingly. The main role of this ministry is to promote the economic growth of Israel, while achieving certain social goals. In accorddance with our view that sees this as harmful interference, most of the powers of this ministry will be eliminated. Powers involved in enforcing laws and regulations will not be eliminated at this point, but the need for such laws and regulations will be reviewed and regulations with no real need will be eliminated.
Removing regulatory and bureaucratic obstacles
"Rabbi Yehuda says: ... and not to lower prices (to sell cheaply, because it accustoms people to patronize him and deprives his colleagues of food); The Sages say: (One who lowers pricereduces the rate) He is remembered for good! (For because of this, fruits in the warehouse are sold more cheaply. And this is the law)".
–Mishneh Bava Metzia, Chapter 5, with the commentary of Rabbi Obadiah of Bartenura included in it.
Currently, Israel is ranked only 52nd in the world and 29th out of 32 OECD countries with the highest incomes in the index of ease of doing business[2]. As a general rule, a high ranking in business freedom leads to better economic and social results, and we therefore aim to facilitate doing business in Israel and win a place in the top five of this index. To do this, we must reduce regulatory requirements and unreasonable bureaucratic obstacles impeding the establishment, expansion and management of business in Israel.
Bureaucratic and regulatory barriers constitute an obstacle to developers and investors who wish to invest in establishing a business in Israel, and encourages them to invest their money and energy elsewhere, or even to give up on the project altogether, thereby harming competition and growth of the Israeli economy. This is especially true for small and medium businesses, which are often unable to bear the costs necessary to meet regulatory requirements or costs of hiring a professional to guide them through the bureaucratic processes. Thus, these barriers tilt the market in favor of major companies and giant corporations in an unfair manner that harms the economy. In fact, regulation often serves to block new competitors, as it is tailor-made for major companies, while Israeli citizens pay the price for the lack of competition. Therefore, even excessive regulation whose necessity isn't evaluated periodically allows elected officials to aid their cronies and lobbyists for extraneous reasons, causing damage to the Israeli economy.
Waiting times for administrative actions will be shortened and their costs will be reduced. In order to make it easier for developers to establish and run their businesses, waiting times for administrative actions must be shortened.
The first step is to examine the need for each and every action, to give up those actions that have no real need, and to simplify as much as possible those that are needed.
The second step is the modernization of administrative systems, so that it will be possible to submit forms and pay them online and possibly to process them automatically in part in order to ease the workload on bureaucrats and other professionals. Afterwards, significantly shorter deadlines will be set, and where necessary, the workforce will be updated. For example, the process of opening a business currently averages12 days and costs about 5,000 shekels. By reducing the bureaucracy involved in the process and providing the option to submit forms online, we aspire to get to the point where it will be done within a single day and at a cost of about 500 shekels.
Unreasonable regulatory requirements will be eased or eliminated. We should distinguish between legitimate and reasonable regulatory requirements, necessary to protect public safety or prevent fraud, and unreasonable demands whose usefulness is marginal or even negligible, while their implementation involves an investment of time and many resources. We undertake to periodically review the regulatory requirements taking into account the circumstances and technological or other developments, and to eliminate or ease unreasonable or unnecessary requirements and restrictions.
The power of the Israel Standards Institute will be reduced as described in the chapter in this section that deals with imports.
Approval of commercial building construction will be easier when Zehut's housing program is implemented, as set forth in the housing chapter of this section.
Contracts will be enforced move efficiently and faster. Today, the average legal process (from filing a claim to the court until the disposition of the judgment) takes 975 days. Zehut will shorten the time it now takes to about a quarter of its current time (250 days) by significantly increasing the number of judges, which will help reduce the burden on the judicial system. Some economic disputes will be decided in the parallel system of Jewish civil law (as described in the chapter "The Jewish legal system" in the platform), which will also help reduce the load on the judicial system.
[1] The tax rate prevailing in Liechtenstein.
[2] Doing Business 2017 - Regional Profile 2017 - OECD High Income, A World Bank Group Flagship Report.
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