State mortgage aid among Smotrich’s plans for combatting banks

Just a few days ago, Finance Minister Bezalel Smotrich said in the Knesset Finance Committee, “I am currently looking for a formula that will lead to a situation in which the state will have maximum tax gains for banks, in a way that will not simply mean more revenue for the public treasury, but will enable us to allocate an amount specific to the relevant target groups. Globus has now learned what the Minister had in mind.

The Finance Ministry is considering using planned taxes on banks’ super-profits to fund a fund to support mortgages for families hit hard by rising interest rates. Under the proposals, these families would receive grants at varying rates. However, it is not clear when, if any, the plan will go into effect, and professional staff at the Ministry of Finance have a long list of reservations about it.

Finance Ministry officials admit that no specific work has been done on the initiative, and some even oppose it. The Budgets Division and the Israel Tax Authority have raised various difficulties that could arise from imposing special taxes on banks, and the Accountant General’s Department has reservations about subsidizing mortgages.

The budgets department fears that banks will compensate for the new tax in various ways, such as through tougher credit terms for those with low credit ratings. The Finance Ministry is trying to find out to what extent the Bank of Israel will insist that banks not concede with one hand and take with the other.

A fund to help subprime borrowers is still very much a crude idea. Despite Smotrich’s claim that the Finance Ministry was “very close to formulating a formula,” there seem to be more questions than answers on the matter. How will beneficiaries be selected for support? When will the fund be established? How will the mechanism work? And is it subject to inflation because making loans more expensive is the goal of monetary tightening to curb private consumption? Within a week and a half, senior officials of the Ministry of Finance and the Bank of Israel will try to make progress on this matter, and they will probably put together a team that will try to provide answers.

Shooting in all directions

Smotrich is determined to fight the Banks, and the solutions the Budgets Department has come up with do not satisfy him. The Department of Budgets proposed solutions in terms of transparency, as well as the idea, presented by Smotrich in the Knesset Finance Committee, of a “default deposit” tender, in which the bank offering the best terms would get a large exposure to its competitors. websites. Smotrich embraces the idea, but demands that the people in his ministry bring out heavier artillery.

For now, Smotrich is shooting ideas in all directions, hoping to find a hit somewhere: taxing super-profits; creation of a mortgage assistance fund; tender deposits; state-guaranteed mortgages; And even bring in foreign banks. For all his pronouncements, there is still no solid plan for any of these proposals.

Ultimately, Smotrich’s main goal is to deal with what started the fuss in the first place: to get banks to raise interest rates on deposits just as they did on loans. If they did, he would likely abandon complex legislation. But this will not help the weaker sections of the population, whose main problem is bank overdrafts.

Published by Globes, Israel business news – en.globes.co.il – on July 5, 2023.

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