Despite the severe manpower crisis in the IDF as well as the profound lack of officers at the captain and major rank levels, the military is being forced to "fire" dozens of officers for whom there are no replacements. 

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This is due to an agreement reached with the Finance Ministry that came into effect in 2016, according to which career officers now have to pass through two organizational gateways before they are awarded permanent tenure, which guarantees them eventual retirement with a bridging pension.

Video: IDF Chief of the General Staff LTG Herzi Halevi stresses the importance of unity. Credit; IDF

The first gateway comes at the age of 28 and the second at the age of 35. A process of performance appraisal is conducted at each organizational gateway for the specific career officer, and then subsequently a decision is made whether or not to enable that officer to continue serving or to let him go. 

A career officer reaching the second organizational gateway, who has not attained the rank of lieutenant colonel or above, is then required to leave the military. In other words, the army de facto dismisses him. 

However, there is a clear anomaly here, as the IDF is required to release those officers even though it does not have other officers to take their place due to the mass departure of officers in recent years.

As part of the agreement reached by the Finance Ministry and the IDF, it was agreed to approve some 900 positions of professional officers with the rank of major, with the ministry not approving the military's request to increase the number by an additional 350 positions. 

As a result of the lack of positions, numerous functions in the army are either unmanned or manned by young and inexperienced officers.

We should recall that the IDF is currently facing one of the largest manpower crises in its history, and in the last two years has had to contend with a constant stream of officers deciding to leave. 

In February, Israel Hayom revealed that 613 officers with the rank of major left the IDF of their own volition in 2022 – a 70% increase compared to 2020.

According to new figures obtained by Israel Hayom, despite the current rifts within Israeli society, during the first half of 2023 only a minor decline was recorded in the number of officers deciding to leave the army on their own initiative compared with 2022. 

In the first six months of 2022, the number stood at 217 officers with the rank of major, while in the same period in 2023, it was "only" 180. Traditionally, however, most officers tend to leave during the second half of the year.

According to the updated forecasts in the IDF Manpower Directorate, by the end of the year, some 540 officers with the rank of major will have left of their own volition. However, the forecast was written before the so-called reasonableness law was passed in the Knesset and prior to the declarations by thousands of reservists that they will cease their volunteer duty.

As such, there is grave concern within the IDF that the trend of career officers leaving will only get worse. It is safe to say that career officers will not make any public announcements but will simply not extend their service contracts. 

As mentioned above, when senior officers leave en masse, the army either remains with unmanned positions or ones that are manned by inexperienced officers, which poses a considerable inherent danger that with time, the IDF will gradually become a mediocre military.

The manpower crisis is grave regardless of the government's recent steps to push ahead with the judicial reform and career officers are reluctant to remain within the system in view of the low salaries they earn relative to the endless hours they put in, the hostile public attitude towards them, their inability to lead a reasonable family life and the fact that the army can simply decide not to extend their service if they fail to pass through the organizational gateways.

 The shift from the budgetary pension model to the cumulative pension has also greatly contributed to the exodus of officers as although it reduces the public cost of the career officers' pensions it also decreases the extent to which they are invested in the system.

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Over the last year, the IDF has adopted a number of measures to curb this trend, and among others, has granted bonuses to the serving officers and has sent them to take part in a variety of educational and promotional activities. Having said that, even when there is a distinctly severe lack of officers – and there are many who are prepared and even willing to remain in the system – at the end of the day it is the red tape that beats everything.

Just a few days ago, the IDF General Staff Forum – led by Chief of Staff Lt. Gen. Herzi Halevi – held a special one-day seminar dealing with the manpower issue. 

Halevi said the matter was of utmost importance and one that genuinely needs to be addressed in his new Ma'alot multiannual plan.

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Is the Finance Ministry trying to prevent funds from going to the settlements despite being led by a Religious Zionist Party minister and without his knowing? 

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Israel Hayom can reveal that a previously unknown meeting between the Accountant General Department's officials and members of the Finance Ministry's legal counsel was aimed at reversing a decision by former Interior Minister Ayelet Shaked to transfer tens of millions of shekels to the coffers of Jewish municipalities in Judea and Samaria. Smotrich was apparently not part of the meeting, nor was he made aware of it until it happened. 

During the meeting, various ideas were floated as to how to ensure the funds won't be appropriated. The meeting was likely kept under wraps because such a decision if it were to be finalized, could draw outrage among constituents of Finance Minister Bezalel Smotrich, who considers himself a champion of the Jewish communities in Judea and Samaria.

Israel Hayom's reporting suggests that the municipalities are to be dealt a heavy financial blow if the funding will be pulled, as they have already budgeted some of their activities on the assumption that they would get it. 

Video: Mourners bid farewell to Palestinian killed by Jewish settlers in West Bank / Credit: Reuters

The Accountant General Department told Israel Hayom that it was "not going to comment on the content of the meeting and the decisions made." The statement further read that the department "regularly holds professional-level meetings on a host of issues, including those pertaining to the debts of municipalities all across Israel to the state."

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A five-year long-term agreement was signed between the state of Israel and the KKL-JNF concerning national projects like areas of settlement, peripheral development, and environmental projects.

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On Sunday, Minister of Finance Bezalel Smotrich and Chairwoman of the KKL-JNF Board of Directors Yifat Ovadia-Lusky signed the agreement at the Ministry of Finance headquarters. The ministry's CEO Shlomi Heizler, the head of the Budget Division, Yogev Gerdos, the ministry's ombudsman, Assi Messing, and Matan Yigal, the real estate coordinator, with KKL-JNF Co-Chairman Yitzhak Vaknin, CEO of KKL-JNF Amnon Ben Ami, legal advisor, Shimi Brown, and head of the company's finance division, Yuval Yeini, took part in the signing ceremony.

Starting from January 2023 until the end of December 2027, the KKL-JNF will spend NIS 6 billion, of which KKL-JNF will be entitled to claim up to NIS 1.2 billion in tax deductions. In the years 2023-24, KKL-JNF participation is expected to cost about NIS 2 billion per year. The money will be used for settlement development, land preparation, immigration absorption, reducing disparities in the periphery, cultivation of forests and parks, paving roads, and environmental projects.

Smotrich welcomed the agreement and said: "This achievement is credited to the citizens of Israel. This is a historic, important, and excellent agreement and I congratulate it. KKL-JNF is part of the national institutions that for years have been an integral part of the building of the country and its development. I thank the chairwoman and board of directors of the KKL-JNF for approving the agreement that will lead to the promotion of projects of national importance in the settlements, the periphery, and the surrounding area, and I am sure that it will greatly help the citizens of Israel."

Ovadia-Lusky also congratulated the agreement and said: "I am happy that within the framework of this agreement, KKL-JNF will continue to be a partner in the building and development of the State of Israel." The entire budget will be used for national projects that are at the core of KKL-JNF's activities and will continue to strengthen the country as we have done since the beginning of Zionism, as we are doing now, and as we will always continue to do."

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Knesset economics committee proposed rolling back state-controlled milk prices, giving temporary aid to dairies, and threatened to submit legislation to slash food taxes to Western levels as public anger mounts over soaring living costs.

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Prices of dairy products have jumped after a deal between the Finance Ministry and suppliers allowed for a rise in the price of milk of more than 9%. All four of Israel's main dairies have said they would increase prices this week on both supervised and unsupervised products.

"We are deciding right now that the government will give compensation (to dairies) of 100 million shekels ($27.50 million) and take steps to return milk prices to what they were on April 30 so that in the next four months we will work on a long-term solution to this matter," said David Bitan, chairman of the economics committee during the panel's session on Thursday.

He gave the Finance Ministry until Monday to respond positively to his plan to freeze milk prices until September. Should the ministry not agree, Bitan said he would submit a bill to lower the value-added tax (VAT) on food to OECD levels, or around 8% versus Israel's 17%.

But Kfir Battat, deputy director of the finance ministry's budget department, said Israel has not subsidized products since the 1980s and prefers other measures such as tax credits to help citizens cope with inflation.

Annual inflation stands at a 5% rate but costs of food and other items have surged, partly due to supply chain issues. The Bank of Israel has responded with aggressive rate increases.

Lawmakers ahead of last November's election ran on a platform of tackling high living costs.

Yossi Shelley, director general of the prime minister's office, called the milk sector a "government-sponsored cartel" and agreed on steps needed to be taken but that he was not in favor of subsidies.

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Finance Minister Avigdor Lieberman has given preliminary approval for Israel to join the digital economy taxation plan initiated by the Organization for Economic Cooperation and Development, Financial daily Globes reported last week. 

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Lieberman announced his decision at a meeting with senior Finance Ministry officials, ahead of the plan's approval by the OECD on June 30 by ministers of the 139 participating countries. 

The new plan calls for a change in the current global corporate tax system to deal with the phenomenon of companies that declare their profits in countries with low tax rates, irrespective of the countries in which they made their profits, and allow governments to collect more taxes from international companies that sell products and services to their citizens. 

According to Globes, the plan will affect technological giants like Facebook, Apple, Amazon and Google.

"The economy is becoming more and more global," Lieberman said, "and we need to introduce policy measures in cooperation with other countries. The Finance Ministry will act to ensure that the Israeli economy meets international standards in the various areas, including taxation and the environment, such as with a carbon tax. The new policy outlines will enable the State of Israel to obtain revenue from the giant companies on account of their activity in Israel."

According to the International Monetary Fund, a carbon tax is the most effective way to combat global warming and reduce air pollution. The idea to tax carbon emissions from the burning of fossil fuels has been discussed by the government for many years, but the issue died down due to fears of high electricity bills. Economists argue, however, that not only could tax revenues be returned to consumers via dividends, but a carbon tax would spike massive use of renewable energy.

In addition, Lieberman is considering canceling the exemption from value-added tax on purchases made by Israelis from abroad to a value of up to $75, as part of approving the yearly budget.

Proposals to cancel the VAT were submitted to the government on several occasions but were never implemented. Lieberman's predecessor, Israel Katz, opposed the cancellation of the exemption, but business organizations are persistent in their demands.

Israeli retailers complain that the exemption harms their ability co compete against online retailers abroad, whereas the consumer argument is that it enables people to avoid high prices in Israel. In 2018, the matter even reached the High Court of Justice, in a petition by importers and retailers. The court decided not to intervene.

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According to the report that Kahlon has told a number of different people of his intent to resign, it said it was still unclear whether he would step down from the post of finance minister or just remove his name from running in the next parliamentary election.

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A spokesman for Kahlon said there was "nothing new" in the report and declined to confirm or deny the resignation.

Kahlon has been finance minister since the country's 2015 election, when his upstart Kulanu party garnered 10 seats in parliament after promising to tackle soaring housing and other costs.

Kulanu dropped to four seats in an election in April, in which Prime Minister Benjamin Netanyahu failed to form a ruling government. The party ran together with Netanyahu's Likud party but the combined entity fared worse in a subsequent election, losing a combined seven seats from April.

Netanyahu and rival Benny Gantz, the head of the Blue and White party which received one more mandate than Netanyahu, have both been unable to so far form a government. If one is not formed soon, a third election is possible in early 2020.

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Despite the unexpectedly low inflation, it was still double that of 2017 and the highest since 2013.

U.S. President Donald Trump's policies in the energy market may have also played a role in the relatively modest price hikes in 2018. Trump's push for greater oil output from the Organization of the Petroleum Exporting Countries resulted in lower prices at the pump for Israeli drivers and ultimately brought down inflation by 0.3 percentage points.

Inflation was also affected by the Israeli housing market cooling off in 2018, with apartment prices falling by 2.3% in 2018. This can be attributed to the Finance Ministry's flagship program offering young couples subsidized homes through a lottery system.

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Moreover, the prices of regulated dairy products are expected to ‎go up on Jan 1. by 2%–5%, regulated bread prices will ‎rise ‎‎by ‎3.5%. ‎

Last week's announcement prompted several goods and ‎services conglomerates to announce that they, too, ‎would be raising prices.

The move triggered a series ‎of "yellow vest" demonstrations, inspired by the ‎riots in Paris. Protest leaders have called for a ‎consumer boycott of several food giants, most ‎prominently Osem and Strauss‎, two of the largest ‎food manufacturers and distributors in Israel, which ‎were the first to announce a price hike.‎

Addressing the public uproar on Wednesday, Netanyahu ‎said, "The price of electricity is significantly ‎lower than in Europe and I tell you that it will not ‎rise 8%. I don't know by how much it will rise but a ‎few percents in the worst case."‎

Netanyahu said electricity costs have dropped by 15% ‎since 2013 after the Tamar natural gas field off ‎Israel's Mediterranean coast became operational. He ‎said the larger Leviathan gas field, slated to start ‎production in a year, would lower electricity rates ‎further.‎

The Finance Ministry said on Wednesday it had taken ‎steps to curb the expected price hikes.‎

Finance Minister Moshe Kahlon said he met with top ‎Osem and Strauss officials, who have agreed to ‎postpone the move. ‎

‎"As I promised, I am pleased to announce that the ‎current surge in prices has been halted. The Israeli ‎public should not bear unjustified price hikes. The ‎Finance Ministry will continue to act to reduce the ‎cost of living in every field, as we have done in ‎the past four years." ‎

Osem, which had planned a 4.5% price hike, said in a ‎statement that it was shelving the move following ‎Kahlon's promise to the company to examine the ‎‎cancellation of tariffs on a series of raw materials ‎it ‎uses for its production operations.‎

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