A country in quarantine, more than half a million workers in unemployment or mainly in the IDF, but the budget data for January, published this week, illustrate how strong the Israeli economy is. Very strong.
Note the January numbers: a deficit of only NIS 100 million (it is true that there are usually surpluses in January), but what is most important is the state’s revenues: the collection of taxes in January amounted to about NIS 34 billion, a nominal (!) Increase of about 2.2 % Compared to the same period last year.
The tax segmentation provides a very encouraging picture: direct tax revenues (mainly income tax) in the amount of close to NIS 20 billion, an increase of close to 8% from January last year. While revenues from indirect taxes (VAT, for example) amounted to close to NIS 14 billion, a decrease of close to 4%.
These strong figures seem to raise eyebrows: how can a country under corona restrictions, under closures, and with relatively high unemployment rates, manage to generate tax revenues that exceeded January 2020. One answer, at least regarding direct taxes, is that middle- and upper-middle-class workers are The main direct taxpayers in Israel were not harmed at all by the crisis. That is, they were not fired or expelled to the IDF. This is backed up by studies by the Ministry of Finance, which indicated that the low-wage earners are the ones hardest hit by the corona crisis.
But there is another explanation for the strength of tax collection in January, following the trend of recent months, and well described by businessman Shlomi Fogel, who told me: “GDP contracted by less than 4% in 2020, while unemployment rose to over 10%. What does that mean? It means? There is an operational efficiency in every business and business, and unfortunately they had to lay off people and of course there is a severe damage to businesses like restaurants and the like.
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And another amazing thing: state revenues have not gone down! That is, our industries are strong, even though the shekel hurts exports. We must understand that our economy is strong, it does not just rely on restaurants of course – and that means most of the state’s revenue came from places that suffered less from the corona crisis, even in recent years. It’s economic strength, it’s a kind of internal vaccine, despite the political problems. It just shows, despite the criticism of the management of the economy, that we still have resilience. And there is both money and excellent people, and in my opinion the economy will flourish immediately after the corona and we will see a very, very rapid growth in the Israeli economy. “
Right and wrong
In one of the previous columns, I described here the phenomenon of pension supplements in the army, which cost us tens and billions of shekels more. This is the bottom line: the chief of staff, it turns out, had the authority to increase the percentage of pensions of those serving in the IDF to 19% (!), An authority given to him following a very broad interpretation of a 1961 government decision.
For nearly 60 years, the Treasury and the military, as well as the State Comptroller’s Office, have been reminded to address the phenomenon. An examination conducted by the Comptroller in the past revealed the amazing fact that the average increase in the Chief of Staff’s increase for retirees in 2013-2015 is about 8.5%, not including the 6% for the first three years of service, and together about 14.5%. , At the age of 46, and you were entitled to a pension at the rate of 50% (25 permanent years double 2% in the standard year), you actually earned an average rate of 65% of the last salary.
Chief of Staff Aviv Kochavi (Photo: IDF Spokesman)And that, of course, costs us a lot of money. According to Michal Abadi Boyanjo, a former actuary, the actuarial liability of the increase alone cost the taxpayer only NIS 2.9 billion in three years. That is, for decades it is tens of billions of shekels, all because the chief of staff is allowed to jump the pension . After all, military retirees also receive a budget pension (or mediation pension) at a young retirement age (46 on average) and by the age of retirement they have 21 years in which they receive a pretty good pension. So why give them another significant pension supplement?
Another auditor’s report revealed to us that in 2018 the increase in the Chief of Staff’s budgetary pension was about 9.5%, and its cost to the state budget in one year alone was NIS 1.1 billion (!), A huge amount just for the pension supplement and not the pension itself. Flying “from the state budget about a billion shekels only on additions to the pension, and not to the pension itself. The cost of the annual general pension for military retirees is already approaching 8 billion shekels.
From capital to capital, this has fallen to the jurists and the Supreme Court, and the Ministry of Finance and the Ministry of Defense are having a hard time reaching any conclusion on the matter. On the one hand, Defense Minister Bnei Gantz’s position is decisive and outrageous: in no way touch on the Chief of Staff’s magnifications, a position he expressed in a letter sent to him by Prime Minister Benjamin Netanyahu on January 21 this year, in the following language: “In September I addressed you on the subject. . I noted that this is a matter of policy, which requires a decision at the level of ministers and the prime minister. Following this, you assumed that it was true that the issue would be discussed between me and the Minister of Finance, and in the absence of agreement, it would be brought to a joint ink headed by you. You also landed on the outline summary within three months.
“On November 19, 2020, I again addressed you on the subject, following the discourse that the Chief of Staff also has with you, and I pointed out its far-reaching implications. Among other things, I emphasized that similar arrangements exist in many sectors of the economy, and highlighted the great difficulty, especially at this time, in the severe and severe harm to tens of thousands of permanent servicemen and their families, tens of thousands of IDF retirees, widows and children.
“In view of the complexity of the issue, as well as the large number of issues facing the government recently and the lack of an agreed state budget, it was not possible to formulate an agreed outline in the original period you laid down. Since this issue cannot be decided in principle in the short time until the election, I He recommends that the elected government be required to do so in the post-election period, requesting that it be instructed that the agreed outline be formulated within six months of a new government being sworn in, and that if no such outline is formulated, the matter be brought before the Prime Minister for decision.
Ministry of Defense, Campus (Photo: Reuven Castro)“Since the state must present its position to the High Court by the end of January, it is required that it be instructed to submit to the ministers and prime minister in the new government a reasonable time to be required for the matter.”
So here’s it: Ganz is absolutely right that there are many other sectors in the economy that have pension arrangements that allow them to increase their pensions significantly: for example, attorneys (3% accrual per year instead of 2% per annum) and judges (also larger provisions by seniority). Gantz, however, is completely wrong when he speaks of “severe and severe damage to tens of thousands of permanent servants,” since the more severe damage of all the budgetary pension damages, over decades, has been in the millions of other citizens who do not enjoy such a generous pension.
Another reminder to Gantz of those who will be “severely injured”, according to him: about 19,000 shekels, this is the average allowance of officers who retired from the army in 2018, while the average retirement age is 46. According to the Ministry of Finance, the average allowance is close to NIS 20,000 gross. In any case, according to the average retirement age, an army officer receives until the official retirement age (67) an average amount of about NIS 5 million (!) In the payment of a budgetary pension, while such a benefit does not exist in the private sector, of course. According to the average life expectancy, the budgetary budget in the army is about NIS 7-8 million, and of course high-ranking people (although retiring relatively late) receive much higher pension benefits, which can reach NIS 20 million and even more.
“Legal difficulties”
And of course, without the position of the lawyers, it is impossible, and in honor of the matter (the petition to the High Court on the subject) an opinion was issued at the end of January this year by Raz Nizri, Deputy Attorney General, and Orit Kotav, Deputy State Attorney (Civil Affairs). This one, whose bottom line is that there is no bottom line – there are “legal difficulties”.
Here are its twists and turns: The government’s decision regarding the Chief of Staff’s pension increases from 1961 “is worded in vague language and is not clear enough, and therefore does not meet the conditions of the authorizing law section, which states that the government will determine the conditions and rate of the Chief of Staff’s increases. “It is clear what economic or other circumstances the government decision stipulates that the chief of staff must consider, and the formula set forth in the decision is not clear enough and subject to various interpretations.”
Meaning: Among the Shitin it is possible to understand that they played with the law, played with its interpretations, and thus an unhealthy, not to say illegal, situation was created, which the chief of staff can do as he pleases with pension increases.
“Our position was and remains that it is appropriate and required that the decision on the matter be made by the relevant political echelon … We do not believe that legal advice should decide on a question of policy and certainly not on this sensitive issue, involving not simple public and social issues.”
Meaning: Leave us, break your head between you. We will be at your disposal at the legal level, but on this sensitive issue of increasing budgetary pensions for military personnel – we do not intervene.
Do not intervene? not exactly. Note what is written in the opinion in legal parlance: “In formulating a new decision, the existence of a real difficulty in interpreting section 18B of the Permanent Service Law (‘Pensions’) as authorizing the government to grant increases to all those retiring from the permanent service, without criteria, should be considered as a central consideration. All are defined. ” That is, it means that the law did not allow any increases without any criteria!
Continuation of the jurists: “Let us be clear – Article 18B authorizes the government to set an exception to the rule of calculating the fixed benefit at 2% per annum, so that the exception will apply to some servants and does not authorize the government to grant sweeping increases to all servants, as reflected in the interpretation “To the extent that the relevant policy makers believe that the appropriate arrangement in our case is to provide enlargements to all servants and not as an exception to some of them, then on the face of it it seems that this will need to be anchored in primary legislation, that is, in a preliminary arrangement …”
Meaning: Again, what you did when you handed out Chief of Staff additions to all the servants in a sweeping way is actually illegal. Want to continue with that? Please: We have anchored this in primary legislation.
Map of interests
I am willing to take a risk here and bet that not much will happen next, that the chief of staff’s additions will not be significantly cut, and whoever dreams that maybe because the chiefs of staff acted illegally, money will also be refunded due to overpayment in the past – will continue to dream. If anything else happens, I would love to eat the hat.
Meanwhile, in the High Court hearings, Justice Yitzhak Amit decided that the hearing that was supposed to take place this week on Sunday “will focus on the possibility that a conditional order will be issued, as well as the way the respondents (the state) treat retirees from now on.” This sounds promising that the High Court will intervene anyway, but another vision for the date.
What has happened here and in all the crooked decisions that have been made is a reflection of the enormous waste in the public sector, and especially in the budgetary pension. It is tens of billions of shekels that have been given away from the public eye over the years, under the code of “enlarging the chief of staff”, and suddenly, nearly 60 years after the law was enacted, lawyers and finance officials remembered that it was not exactly kosher. He stood up and said: “Up to this point. Sorry, where exactly have you been for decades? The answer is clear: they, too, participated in the celebration of the budgetary pension in distorted arrangements that cost us a fortune.”
One has to understand the map of interests: there is a very strong and very broad lobby in favor of continuing the distortions in the budgetary pension. It’s not just the military lobby, which Gantz represents today, and it’s not only the lobby of the judiciary, it’s also the lobby of senior officials, the lobby of the academic elite that enjoys similar arrangements and more. Everyone wants to keep the cream.
Anyone who also thinks that these arrangements have passed away is deceiving himself. In the military, the budgetary pension continues in the guise of a “bridging pension,” while in the other sectors we have a commitment to veteran budgetary pension retirees in the amount of hundreds of billions over decades.
In the meantime, petitions will continue to roll in the Supreme Court, jurists will continue to issue tortuous opinions – and budgetary pension funds will continue to be paid from the state budget.