Funding Israeli-Arab Business Development Supports Growth

The revenue problems of Israeli-Arab municipal governments are not due to small grants from the central government, but from their weak tax base. Supporting business growth will widen the tax base and strengthen the municipalities

Haaretz published an article by Malec Bader regarding the recent decision of the government to regulate balancing grants given to the local councils. The new decision redefines the criteria for eligibility and links it to the council's property tax collection efficiency. Moreover, the government decision includes a promise to reexamine the grants mechanism in the future.

Bader claims that the main issue has yet to be addressed: the problem of low revenues from commercial taxes stemming from a weak tax base.

This phenomenon is linked to two main characteristics of the Israeli-Arab sector:

  1. The percentage of SMB's (Small and Medium Businesses) in the Israeli-Arab sector is higher in comparison to the percentage of SMB's in the Jewish sector.
  2. Poor access to credit stymies the growth of new businesses.

Strengthening the tax base of the local councils is feasible only with the development of larger and stronger businesses.

This development is conditioned on solving the funding issues that impede the growth is Israeli-Arab businesses. This will ensure a steady stream of income to the councils and guarantee financial independence.

For further information, see:

Ignoring Israel's Potential Engines of growth

Industrial policy: it's the process not the content

Doomed to choose: Industrial Policy as Predicament

Makov Committee Report

Sources:

Malec Bader, Ha'aretz, 29/01/2007. Click here for the article.

Click here for the recent government decision regarding the local councils.