The Ministerial Committee on Legislation on Sunday voted in support of a bill that would levy massive taxes on NGOs — nongovernment organizations — funded by foreign governments, and erode their right to file lawsuits in Israeli courts.
The bill, sponsored by Likud MK Ariel Kallner, would allow the government to tax foreign government donations to domestic nonprofits at a rate of 80 percent while also stipulating that courts need not consider petitions by groups “primarily financed by a foreign political entity.”
If passed into law, the legislation would apply to NGOs that do not also receive Israeli state funding. The finance minister, with the approval of the Knesset Finance Committee, would be allowed to exempt organizations from the new rules “in special circumstances.”
The bill would likely block human rights organizations from being able to operate in Israel and the West Bank, as many of them rely on funding from foreign governments.
Human rights groups — such as B’Tselem, Breaking the Silence, and the New Israel Fund — have long been targeted by the Israeli right and even the political center over their focus on alleged Israeli human rights abuses against the Palestinians.
“The purpose of this bill is to reduce the indirect influence of foreign governments and political entities on the State of Israel. This influence is manifested, among other things, in direct financial support for nonprofit organizations in Israel, which act as agents of change on behalf of these entities,” the bill’s explanatory notes state.
The bill argues that such external funding “goes beyond the limits of the democratic framework and harms the sovereignty and independence” of Israel.
If two countries have a dispute, “they must try to convince each other through diplomatic means, dialogue and negotiation between counterparts, but not through financing change agents and organizations whose purpose is to lead change from within in favor of the aforementioned foreign interests,” it adds.
Following the Ministerial Committee’s vote on Sunday, the Association of Civil Rights in Israel accused the government of attacking liberal civil society groups while leaving right-wing organizations untouched.
“This proposed legislation is a direct assault on Israel’s democracy and part of the ongoing judicial coup. It represents a systematic attack on all institutions that check government power, and specifically targets human rights organizations working to protect minorities in Israel and Palestinians in the occupied territories,” Noa Sattath, ACRI’s executive director, told The Times of Israel.
“The selective taxation targets only foreign state funding from Israel’s closest allies — including the United States and European Union member states — who support democracy, human rights, and minority protection. Meanwhile, right-wing organizations relying on private donations remain unaffected, and the finance minister has discretionary power to exempt certain organizations while those receiving state funding are automatically excluded.”
A previous version of the bill was shelved amid an international uproar nearly two years ago.
That proposal, also sponsored by Kallner, did not touch on NGOs’ legal standing but mandated that any nonprofit group that engaged in public advocacy two years before or after receiving a donation from a foreign government would lose its status as a public institution and would no longer be eligible for tax exemptions, and in addition would be hit with a 65 percent income tax.
The Biden administration aggressively lobbied both publicly and behind the scenes against the bill alongside nearly a dozen countries in Europe that give millions of dollars a year to various civil society organizations operating in Israel and the West Bank, particularly ones that seek to promote the conditions necessary for a future peace agreement between Israel and the Palestinians.
This led to the bill being pulled from the Ministerial Committee on Legislation in May 2023. Likud sources said at the time that Prime Minister Benjamin Netanyahu was responsible for the decision to withdraw the bill. The premier was said to be reluctant to advance the ally-angering legislation while still waiting for a coveted invite to the White House, among other diplomatic considerations.
Meanwhile, in a letter to Elon Musk, who leads the Trump administration’s new Department of Government Efficiency, Otzma Yehudit lawmaker Yitzhak Kroizer stated on Sunday that the US government had previously used “American funds to exert improper influence in Israeli affairs” — specifically citing the now-defunct V15 organization.
“It is evident that American funds have been improperly allocated in Israel, throughout the Middle East, and indeed across the globe. Given your recent efforts to ensure greater transparency and accountability, I respectfully request access to available information regarding subsidies and grants provided to non-governmental organizations, media outlets, and individual journalists operating in Israel,” Kroizer wrote.
“Publicly available sources already indicate that USAID and other U.S. government agencies have allocated millions of dollars to these entities within a relatively short period of time. The misuse of foreign funds in Israel, particularly in ways that undermine national interests and the democratic process, is a matter of the utmost concern,” he continued. He also asked for a meeting to discuss the matter.
In the 2015 elections, the US-funded V15 organization was accused by Likud of inappropriate political meddling for its ostensible efforts to unseat Netanyahu by encouraging center-left voters to go vote on election day. The state comptroller cleared the organization of any campaign law violations.
In 2017, the Knesset passed the so-called V15 law, which aims to prevent wealthy donors from using political organizations to bypass election funding laws.
Jeremy Sharon, Jacob Magid and Carrie Keller-Lynn contributed to this report.