Finance Committee (Israel)

The Knesset Rules of Procedure formally define the Finance Committee's sphere of interest as the State Budget; taxes of all types; customs duties and excise; loans; currency and foreign-currency matters; banking and banknotes; and State revenue and expenditure.[2] Within those subject areas, the committee may deliberate on bills and secondary legislation, scrutinize the Government and public authorities, consider the implementation of legislation it has previously deliberated, and take up matters referred by the Knesset Plenum or Presidium, issues placed within its jurisdiction by law, and topics initiated by the committee chair or individual Knesset members.[2]

The committee's powers are further shaped by Basic Law: The State Economy, which anchors several specific functions in constitutional-level law. Under that Basic Law, the Finance Committee appoints the date by which the Government must submit the annual Budget Bill to the Knesset, within the statutory window of no earlier than six months and no later than sixty days before the financial year begins.[8] The Government's multi-annual budget — comprising the coming year's Budget Bill plus a plan for the next two consecutive years — is laid before the Knesset together with the Budget Bill itself.[8]

The Basic Law also assigns the Finance Committee a role in managing expected budget differences during the fiscal year. The Minister of Finance must report to the committee on expected economic and fiscal trends no later than sixty days before submission of the Differences Report.[8] Where an expected expenditure or deficit difference cannot be fully covered by the Adjustments Budget, the Government submits a Balancing Plan to both the Knesset and the committee.[8]

If a difference remains, the Government brings a reduction plan to the committee for approval; the committee may propose changes to that plan to the Minister of Finance by December 15 of the preceding year, after which the Government must submit its final plan for committee approval by December 24.[8] If the committee does not approve the relevant plan, the Basic Law provides for automatic, equal reductions across budget expenditure items to cover the remaining shortfall.[8]

Beyond the budget cycle, the Basic Law provides that taxes, compulsory loans, and other mandatory payments whose rates are not set in law may require prior approval by Knesset resolution or by a committee authorized by the Knesset before their rates are prescribed in regulations.[9][8] Knesset committees more generally may invite ministers, senior officials, and experts to assist their deliberations, and may require relevant ministers or their appointees to provide explanations or information on matters within the committee's competence.[10] They may propose amendments to bills under consideration, provided those amendments do not impair the bill's general topic, and return amended bills to the plenum for a second reading.[10]

The Finance Committee was established among the nine permanent committees of the First Knesset and assigned jurisdiction over the budget, taxation, customs, loans, currency, excise, state income and expenditure, and state property and trusteeship.[7] The Israel Year Book's account of the early Knesset captures the centrality of committee work in those formative years, noting that plenary sessions averaged about twenty hours a week and that every Knesset member belonged to two committees, with Finance Committee members also serving on other committees dealing with economic matters.[7]

The budget process in the early state followed a structured sequence: the Finance Minister first introduced the budget proposal in the Knesset plenum, outlining the country's economic situation and fiscal and taxation policy; following a general debate, the proposal was referred to the Finance Committee for preparation for its second reading.[7] The early state budget was divided into three parts — the Ordinary Budget for regular expenditure from current revenue, the Development Budget intended to develop the country and economy and support immigrant settlement, and the Defense Budget.[7] The Finance Committee dealt with the Defense Budget in secret session, reflecting the sensitivity of security expenditure during the years immediately following Israel's War of Independence.[7] Defense spending was partly covered by the Ordinary Budget when funds were available, with the larger portion covered by long-term loans and increased banknote circulation.[7]

Because full budgets were not ready at the start of the fiscal year, the First Knesset relied on interim and partial budgets throughout 1949: a three-month budget passed on April 25, a one-month budget on June 27, and a partial budget for August on July 27.[7] The first complete Ordinary Budget was approved on September 1, 1949, by 60 votes to 25.[7] A three-month interim budget passed on March 28, 1950, by 47 to 27, and the second Ordinary Budget was approved on June 29, 1950, by 44 to 25.[7] By the second year only one interim budget was required, reflecting the growing administrative capacity of the new state.[7]

The committee's role in tax legislation was already visible in the mid-1970s. In a June 1975 speech, Finance Minister Yehoshua Rabinowitz described the Finance Committee as working intensively to advance both income-tax reform legislation he had tabled and a VAT bill introduced around the same time.[11]

The Finance Committee is one of the Knesset's permanent committees.[2] After elections, an Arrangements Committee headed by a member of the largest Knesset faction determines committee composition, taking into account party composition, faction sizes, and faction notices assigning members.[2][6] Committee chairpersons are formally elected at the committee's first meeting, based on nominations by the House Committee; the Finance Committee's chairmanship has traditionally been awarded to a member of the governing coalition.[6]

Ministers and deputy ministers cannot serve as committee members or substitutes.[2] The Rules of Procedure also provide for permanent and temporary substitutes under specified conditions.[2]

The committee's political weight is reflected in the prominence of those who have chaired it. Finance Committee chairs Yaakov Litzman and Moshe Gafni, both of the ultra-Orthodox United Torah Judaism party, held the post during much of Benjamin Netanyahu's tenure as prime minister.[5] In April 2021, a temporary Finance Committee was established with sixteen members, again chaired by Moshe Gafni, to serve until a new government was formed or another election occurred.[4] Oded Forer had chaired the preceding temporary committee for approximately two months.[4] In March 2026, the committee was chaired by Likud MK Hanoch Milwidsky.[12]

Representation on the committee has changed significantly over time. No women served on the Finance Committee until 1984; by the Eighteenth Knesset in 2011, six women held seats on it.[1]

The Finance Committee's most consequential regular function is preparing the annual Budget Bill and the Economic Arrangements Bill for second and third readings in the Knesset plenum.[3] This is not a purely formal exercise: the committee can significantly affect the budget's composition, including the allocation of financial support to sectors and organizations, and certain of its decisions do not require subsequent plenary approval.[4] Budget transfers between government ministries, extensions or non-extensions of temporary provisions — particularly tax provisions — and major economic reforms are among the matters that pass through the committee.[4]

During periods of transitional government, those powers become especially visible. In 2019, billions of shekels in transfer requests had accumulated while the committee was inactive for approximately two months; the committee was expected to approve only some, with urgent defense or health needs cited as likely priorities.[13] When a temporary Finance Committee was constituted in April 2021, it carried the same authority to approve budget transfers and economic measures subject to legal advice.[4]

The scale of the committee's work is illustrated by the 2026 budget cycle. In March 2026, the committee chaired by Hanoch Milwidsky approved the 2026 state budget for second and third readings, with authorized government spending placed at approximately NIS 850 billion — including roughly NIS 621 billion for the regular budget and NIS 228 billion for development and capital.[12] The revised defense budget exceeded NIS 142 billion, reflecting an addition of more than NIS 30 billion.[12] Failure to complete the plenary readings by the end of March would automatically have dissolved the Knesset, concentrating considerable pressure on the committee's deliberations.[12]

The 2016 budget cycle illustrated the committee's leverage in negotiations with the executive. Chair Moshe Gafni suspended committee work on the budget and Economic Arrangements Bill — including deliberations on a housing tax, a corporate-tax cut, high-tech tax benefits, and a municipal property-tax fund — to seek substantive agreements with the Finance Ministry, with a December 12 approval deadline looming.[14] The episode demonstrated that the committee chair could halt and restart the timetable while seeking agreements with the executive.

In 2008 the committee's handling of legislation addressing Holocaust survivor stipends illustrated another dimension of its role. A bill co-written by MKs Colette Avital and Moshe Gafni would have excluded old-age pensions and National Insurance allowances from income counted toward stipends for needy disabled Holocaust survivors; the committee postponed a vote after the Treasury objected and promised to address the issue in an assistance package.[15]

An amendment to Basic Law: The State Economy passed on March 21, 1983, and published on March 30, 1983, established that the detailed Ministry of Defense budget is submitted not to the full Knesset but to a joint committee of the Finance Committee and the Foreign Affairs and Defense Committee.[9] This arrangement is now codified in the Budget Foundations Law of 1985, which anchors the joint body's existence and authority and specifies that it draws equal numbers of members from the two committees.[5] Because the defense budget is defined in law, the joint committee has the same authority as other Knesset committees to formulate legislation.[5]

The joint committee conducts detailed scrutiny of defense spending, reaching what a former member described as "very high resolution" — including discussions of allocations involving only a few million shekels within an annual security budget described as approximately NIS 80 billion.[5] This contrasts with the former member's assessment of other state-budget items, which the Finance Committee sometimes discusses for only a few hours before coalition majorities approve them.[5]

Under the Knesset Rules of Procedure, the chair of a joint committee made up of two permanent committees is the chair of the committee named first in its title. The joint defense-budget committee's name was changed during a previous Knesset to place the Foreign Affairs and Defense Committee first, enabling its chair rather than the Finance Committee chair to lead the joint body.[5]

The workings of the joint committee were on display during the 2019 defense-budget cycle. The government approved the state budget on January 12, 2018, and the Knesset gave it final approval on March 15; before that final vote, the joint committee conducted a detailed review intended to provide Knesset authorization for the defense budget.[16] The final joint-committee meeting included Defense Minister Avigdor Liberman, the IDF chief of staff, and the chief executives of the Defense and Finance Ministries.[16] Liberman told the committee that the Finance Ministry had cut NIS 6.2 billion from the multi-year Gideon Plan as part of government-wide budget reductions, and that the Defense Ministry had separately financed a NIS 2.1 billion Gaza barrier project assigned by the cabinet that was not included in the plan.[16] He stated that the ministry sought restoration of the plan's original funding rather than a net increase; with the finance minister's consent, the matter was referred to a special committee chaired by National Security Council head Meir Ben-Shabbat for recommendations to the political-defense cabinet.[16]

During those same deliberations, members of the joint committee proposed approving the overall 2019 defense-budget total while withholding approval of the detailed activity-area and program allocations, then preparing changes, consulting the security establishment, and finalizing the details by July or August 2018 — before the budget's January 1, 2019 start.[5] Committee chair Avi Dichter did not accept the proposal.[5] The episode showed a distinction between the joint committee's legal authority over detailed allocations and its leadership's choice whether to exercise that authority in a particular case.

Under the continuation-budget provisions, detailed Defense Ministry and security-body expenditures likewise go before the joint committee, while the Minister of Finance reports to the Finance Committee once a month on government expenditures under the continuation-budget plan.[8]

A Library of Congress study completed in December 1988 described a distinctive institutional relationship between the State Comptroller and the Finance Committee. At that time, the State Comptroller's budget was submitted directly to the Finance Committee and was exempt from prior consideration by the Ministry of Finance, helping preserve the Comptroller's independence from the executive branch.[17] The study also described the Comptroller as acting in conjunction with the committee, reporting to it when necessary, and being able to recommend that it appoint a special commission of inquiry.[17] In that historical arrangement, the Finance Committee had a role not only in appropriating funds but also in facilitating independent scrutiny of government spending.

The Finance Committee's jurisdiction over taxation and state revenues has brought it into debates extending beyond conventional fiscal matters. On May 13, 2013, Finance Committee chair Avishai Braverman argued that the Knesset should determine how much natural gas would be reserved for domestic use and how much could be exported, grounding that claim in the Knesset's role in setting the royalties the state would collect from natural-gas sales.[18] The position was offered in the context of debate over the Tzemach Committee's recommendations and represented Braverman's personal advocacy rather than a committee decision, but it illustrated how the Finance Committee's statutory remit over state revenues could be invoked to assert parliamentary authority over strategically significant economic questions.

The Finance Committee is one of only two Knesset committees — the other being the Foreign Affairs and Defense Committee — that continue operating after elections and before a new government and coalition are formed.[5] This continuous operation gives the committee unusual institutional significance by allowing fiscal oversight and specified economic decisions to continue during periods of political transition.

During the COVID-19 emergency in March 2020, the Knesset approved an Arrangements Committee that could appoint provisional committees for financial matters as well as for foreign affairs and defense until standing committees were re-established.[19] This arrangement was explicitly temporary and did not replace the ordinary standing Finance Committee; it demonstrated the legislature's ability to maintain financial oversight under extraordinary circumstances.

The committee's persistence across the transitional period carries practical consequences. During the extended 2019 period of transitional government, the temporary committee could approve certain economic measures — including budget transfers between ministries and the extension or lapse of temporary tax provisions — subject to legal advice.[13] The accumulation of unresolved transfer requests during the committee's two-month inactivity illustrated how much routine fiscal administration flows through it even in normal times.[13]

The committee has periodically attracted criticism regarding both the depth of its oversight and its procedural conduct. Former MK Ofer Shelah assessed that the Finance Committee sometimes discusses major non-defense spending categories for only a few hours before coalition majorities secure approval, limiting scrutiny compared with the far more granular review conducted by the joint defense-budget committee.[5] This was an experienced former member's assessment rather than a settled institutional consensus.

A notable legal challenge arose in August 2026, when the committee approved a series of budget transfers during an election period. Those items had not been reviewed by the Recess Agreements Committee, described as the mechanism for allowing legislative and budgetary action during an election period only with the approval of a body with equal coalition and opposition representation.[20] MK Na'ama Lazimi and the Hiddush Organization for Religious Freedom and Equality petitioned the High Court of Justice over the proceedings; Justice Alex Stein issued a temporary injunction blocking most of the transfers approved in that session, exempting only those related to emergency civilian expenditure.[20] The transfers had included proposed funding for education, religious and cultural programs, local authorities, and emergency civilian needs.[20] The legal challenge and resulting injunction placed the committee's conduct during election periods under significant scrutiny and remained unresolved at the time of reporting.