Netanyahu Faces Harsh Criticism Over Draft Law, Ultra-Orthodox Funding, and Tax Policies
In early August 2026, Israeli Prime Minister Benjamin Netanyahu came under intense scrutiny following a controversial Finance Committee meeting convened during the Knesset recess. Netanyahu instructed Knesset Speaker Amir Ohana to approve an additional 360 million shekels in funding for ultra-Orthodox institutions, including 268 million shekels allocated to religious and exempt institutions that do not teach core curriculum subjects. This move, occurring just 80 days before the upcoming August 17 Likud primaries, sparked opposition petitions to the Supreme Court, though the funding process continued unabated.
The episode exposed Netanyahu's prioritization of maintaining his political bloc over substantive legislative reforms, particularly regarding the contentious draft law. Critics argue that discussions about the draft law and related arrests are mere political theater, with Netanyahu delaying the Likud primaries to consolidate control. Likud ministers have publicly supported Netanyahu's campaign, despite concerns about the party's direction and internal discipline.
Economically, Israel has seen a significant tax burden increase over the past three years under Netanyahu's government, with frozen income tax brackets and credits until 2028, higher national insurance contributions, and a rise in VAT from 17% to 18%. Additional taxes on capital gains, banking, and municipal property rates have also been introduced, contributing to rising living costs. Calls for urgent tax reform emphasize increasing indirect tax collection, particularly VAT, to combat tax evasion prevalent in certain communities, and restructuring tax benefits that disproportionately favor the wealthy.
Former Finance Minister Moshe Kahlon is highlighted as a key figure capable of addressing the cost-of-living crisis, having previously implemented impactful reforms and resisted price hikes. However, his political future remains uncertain due to a criminal plea deal related to the Yonet Credit affair, raising questions about his eligibility to return to politics.
Separately, the Competition Authority has delayed the completion of a 4 billion shekel sale of Discount Bank's credit card company, CAL, to Union Motors and Harel Investments since September 2025. Regulatory hurdles, particularly concerning customer loyalty programs and potential market concentration, have stalled the deal, frustrating buyers and competitors alike. Critics accuse the authority of hindering competition rather than promoting it, with no decisive intervention from Netanyahu or Finance Minister Nir Barkat.
Overall, the political and economic landscape in Israel is marked by deepening divisions within Likud, escalating public dissatisfaction over fiscal policies, and regulatory challenges impacting market competition, all unfolding in the lead-up to critical elections and government formation.
