This is the sixth essay in a multi-part series of blogs regarding what the Yesh Atid party has accomplished for Israel in its year and eight months in office.
THE CHANGE: As a result of Yesh Atid’s laws and policies, small businesses have been put to the forefront of Israel’s economic plans.
THE BACKGROUND: Small businesses are the engine of economies worldwide. Serving as the number one employer, their success translates into success for a country’s economy. In Israel, small businesses make up 55% of the job market. For years, Israel’s small businesses have been neglected. Yair Lapid and the Yesh Atid party campaigned throughout the 2013 elections on a platform which made assisting small businesses one of our main priorities. And, that is exactly what we have done.
Upon arriving in his position as Finance Minister, Yair Lapid learned that in 2012, small businesses that provided services to the government were paid late for their services an astounding 67% of the time. This caused terrible problems for the cash flow in these businesses especially since many of their government jobs were extensive in nature. Aside from the financial damage this caused, it is simply wrong. This is the equivalent of the government borrowing interest-free money from the country’s small business sector. Lapid immediately set up a committee under the leadership of Michal Abadi, the accountant general of the Finance Ministry, to put a plan into place to make sure that the tens of thousands of job orders in all the government ministries are paid for in a timely fashion. The new policy mandated that all transactions up to 50,000 NIS (accounting for 85% of the government’s work orders) be paid within 24 days of the bill’s presentation and above 50,000 NIS by 30 days. In addition, a special website was established to enable small businesses to submit their bills to the government on line.
Yair Lapid made another policy change with major financial ramifications for small businesses. The law used to view the income of a husband and wife who worked together in a small family business as one large salary. This catapulted them to a higher tax bracket resulting in significantly higher taxes. Lapid, as Finance Minister, changed the law and starting January 1, 2014 the income of each member of the couple has been viewed individually resulting in far lower tax payments. These lower tax payments allow small businesses to use their capital for further investment and growth.
Another issue which caused cash flow problems for small businesses was the Value Added Tax. Small businesses would offer customers the option of paying for purchases with a payment plan but were required to pay the VAT upfront to the government immediately upon making the sale. Thus, they had to find the money to pay the government before they were paid in full by the client. Yair Lapid changed the law and starting January 1, 2015 small businesses only pay VAT based on cash in hand. They are now required to only pay VAT when they have collected money from their clients.
Small business owners have had a very difficult time receiving credit from banks. This had prevented them from borrowing the funds necessary to expand and further develop their businesses. Therefore, finance ministry, led by Yesh Atid, established a loan fund which provides small business owners with guarantees of as much as 500 million NIS to enable them to receive loans from banks and grow their businesses.
Aside from helping existing small businesses grow, it is essential that we assist people who want to establish new small businesses. As Finance Minister, Yair Lapid doubled the amount of funds available in government loans for those who want to expand their business. One of the ways in which small businesses can reach new levels of growth is through winning government tenders for large job orders. These tenders generally went to larger companies with clear discrimination against small businesses. Yair Lapid worked to ensure that tenders do not include extraneous conditions which make it impossible for small businesses to compete against large companies. In addition, the ministry’s accountant was given authority to check all tenders for discrimination against small businesses. Steps were also taken to provide small businesses with as much exposure as possible to government tenders and tenders were broken down into smaller components to make it easier for small businesses to compete.
We are very proud that in just a year and eight months in office we were able to provide significant assistance to small business owners and to entrepreneurs seeking to establish new businesses. We look forward to waking up on March 18 after the elections and getting right back to work on these and many other crucial issues facing Israel today and looking ahead towards its future.