The Israeli newspaper Calcalist said that after dramatic sessions and political escalation, Israeli Prime Minister Benjamin Netanyahu was able to pass the “Withheld Profits Tax Law” by only one vote.
The law is expected to generate tax revenues worth 9.25 billion shekels (about 2.4 billion dollars) for the year 2025, but the small margin and the challenge from 6 members of the coalition highlight the deep divisions within Netanyahu’s government, according to the report.
Retained earnings refer to a percentage of a company’s net profits that it retains and does not distribute to shareholders to reinvest it in its core business, or to pay off debts, and is recorded within shareholders’ equity in the balance sheet.
A narrow victory in the midst of chaos
The law was passed after days of political maneuvering, which required exceptional measures. Netanyahu, who was hospitalized after surgery, was forced to leave his bed to cast his vote.
The move was crucial because the stability of his coalition was threatened by a challenge from key allies, including 6 members from the Otzma Yehudit and United Torah Judaism parties. National Security Minister Itamar Ben Gvir played a pivotal role in the opposition, exploiting his influence to increase his financial demands, according to the newspaper.
Despite the apparent “victory,” Netanyahu’s office expressed anger at Ben Gvir’s tactics, accusing him of endangering the stability of the coalition. “There is nothing more irresponsible than destabilizing the coalition at this critical time,” Netanyahu said after the vote. “I expect all members of the coalition, including Minister Ben Gvir, to stop destabilizing the government and endangering its existence.”
Escalating political disputes
Ben Gvir’s opposition is focused on demands to increase his ministry’s funding by NIS 20 billion (about $5.2 billion), including NIS 10 billion in one-time allocations, according to Calcalist.
These demands, coupled with delays in voting on National Insurance levy increases, have created significant financial pressures. Delaying the legislation is expected to result in a loss of between 400 and 500 million shekels ($104-130 million) in state revenues for January alone.
Finance Minister Bezalel Smotrich warned that if these reforms fail to be implemented, the state may have to significantly reduce spending by NIS 4.15 billion (about $1.08 billion).
Accusations of political deals
According to Calcalist, the opposition accused Netanyahu’s government of making secret deals to ensure the law’s passage. The accusations included promises to fund hospitals for members of United Torah Judaism and additional allocations to Ben Gvir’s ministry.
Smotrich denied these allegations during a debate in the Knesset, saying, “There are no deals and no promises. These are baseless accusations.”
With the postponement of the 2025 budget, Israel was forced to work with a temporary budget based on 2024 figures, which restricted ministries’ expenditures and affected the implementation of long-term projects, according to what the newspaper indicated.
While this gives the coalition additional time to resolve its differences, it comes at the expense of the efficiency of operations and the well-being of the public, according to Calcalist, citing experts.
A fragile future for Netanyahu’s coalition
Calcalist estimates that despite the passage of the retained earnings tax law, internal conflicts show that the coalition is still in deep crisis.
Political analysts expect Ben Gvir to continue escalating his demands during the upcoming budget negotiations.
As the deadline approaches next March to approve the budget, failure to achieve this could lead to financial instability and undermine public confidence in the government.
Despite Netanyahu’s success in passing the law, the greatest challenge of achieving stability for his government and ensuring its effective functioning remains elusive.
