Civil society killer: Proposed Israeli Tax Legislation Threatens Civil Society

A draft bill that proposes a hefty 65 percent tax on foreign government donations to Israeli and Palestinian civil society organizations has incited criticism both within Israel and abroad. The bill, which will soon be presented to the government’s Ministerial Committee on Legislation, was spearheaded by Prime Minister Benjamin Netanyahu’s Likud party, after forming a coalition with hardline and ultra-Orthodox parties late last year.

This proposed legislation has stirred up controversy not only in Israel but also among its close allies, including the United States, France, and Germany. Ariel Kallner, the Likud member who proposed the bill, has faced intense local criticism as well.

Joseph Kelly, director at the Jerusalem-based Association of International Development Agencies, voiced his concerns regarding the proposed bill, calling it a “civil society killer.” This association acts as an umbrella group for 80 aid organizations operating in Palestine.

Israeli Sovereignty and the Struggle for Human Rights

The bill’s proponents claim that the tax on foreign donations is necessary to safeguard Israel’s sovereignty. During a special Knesset meeting focusing on “anti-Semitism and delegitimisation facing Israel”, Kallner expressed concerns about “delegitimisation organizations” operating within Israel and how foreign governments potentially undermine Israeli sovereignty by funding these organizations.

Critics, however, see the bill as an attempt to silence criticism of the Israeli government’s policies, especially those related to the Israeli-Palestinian conflict. Michael Sfard, a lawyer representing Palestinian human rights organizations, described the bill as a means to suppress evidence collection that could be presented to international inquiry commissions or the International Criminal Court (ICC).

Experts fear that, if passed, the bill could lead to the collapse of numerous associations, particularly human rights organizations, due to the proposed tax’s severe impact on their funding. They argue that this represents a significant violation of freedom of expression, protest, and association in Israel.

Decoding the Bill’s Potential Impact

The proposed bill consists of two key components. The first proposes changes to the Income Tax Ordinance, redefining what constitutes a “public institution.” This amendment would revoke the tax-exempt status of institutions that are deemed to “[interfere] in the internal affairs of the State of Israel.” The second part of the bill proposes taxing any donation that interferes with Israel’s internal affairs at a rate of 65 percent.

Many fear these measures, particularly the vague definition of “interference,” will target human rights groups that advocate for Palestinians and are substantially funded by foreign governments.

Despite early indications that the bill might face obstacles, concerns persist that it could lead to a significant curtailment of civil society space in Israel. Moreover, the bill’s potential impact is seen as part of a broader push to stifle civil society in the country.