New bill From Netanyahu’s party targets foreign donations to Israeli NGOs, drawing sharp U.S. criticism

Amir Tibon, Noa Shpigel & Ben Samuels

Haaretz  /  May 24, 2023

Top U.S. human rights envoy urges Israel to ensure unrestricted NGO operations without financial or legal impediments. Netanyahu dropped a similar bill under Obama administration pressure in 2016.

The Israeli Ministerial Committee for Legislation is set to debate on Sunday a bill that aims to restrict the ability of Israeli human rights organizations to accept donations from foreign governments. The proposal has drawn sharp criticism from the Biden administration, which has conveyed its strong opposition to the bill through various channels.

On Wednesday, the State Department Spokesperson said in response to the legislation that the U.S. sees NGOs as “critical to democratic and responsive transparent government.”

According to the bill, which was introduced by Knesset Member Ariel Kallner of Prime Minister Benjamin Netanyahu’s Likud party, if a nonprofit organization engages in public advocacy within two years before or after receiving a donation, it will not be considered a public institution eligible for tax exemptions.

The bill defines public advocacy as actions such as appealing to or assisting government institutions (including the courts, the Knesset, its committees, members of the Knesset, the cabinet, ministers, government agencies, local authorities, or their employees) or utilizing paid advertising to promote a cause. Nonprofits falling under these criteria would face a tax rate of 65 percent on their income.

The bill’s accompanying explanatory note highlights its aim to curb foreign “interference” in Israeli democracy through taxation. It specifically targets financial support provided by nonprofit organizations and public benefit corporations that engage in activities involving “interference” in Israeli legal matters, political endeavors, government policies, municipal policies, or public opinion at large.

The explanatory note further argues that the involvement of foreign political entities in the courts through politically motivated legal proceedings, direct influence on public discourse, and attempts to obstruct government and local government policies fundamentally undermines the independent nature of the State of Israel and the sovereignty of its citizens.

The bill was one of the promises made to National Security Minister Itamar Ben-Gvir’s Otzma Yehudit party by Netanyahu was part of their coalition agreement reached at the end of last year. Michael Sfard, a leading Israeli human rights lawyer, said at the time that the move is a “similar step to those taken against human rights organizations in undemocratic countries such as Poland, Hungary and Russia. The inspiration comes from Putin and Orban.”

The U.S. has conveyed its strong opposition to the legislation. The State Department’s spokesperson Matthew Miller said on Wednesday that the U.S. “supports the central role of NGOs as part of civil society,” and “critical to democratic and responsive transparent government.”

“We firmly believe that civil society should have the opportunity and space to operate and raise resources around the world,” he added.

Through various diplomatic channels, Ambassador Tom Nides engaged in private discussions with Israeli officials, while American government representatives publicly voiced their concerns.

Germany’s Ambassador to Israel, Steffen Seibert said on Twitter on Thursday that the bill “is a matter of grave concern to us and to many of Israel’s international partners,” adding that Germany intends to “continue to raise the issue with our Israeli friends.”

The French Embassy’s spokesperson, meanwhile, said the legislation is “deeply concerning” and emphasized the “critical role of civil society in the life of every democracy.”

Earlier this month, Michèle Taylor, the American ambassador to the U.N. Human Rights Council, issued a statement saying that Israel must “ensure human rights and other non-governmental organizations can operate freely and refrain from any financial or legal restrictions that may impede their work.”

A similar legislative initiative sparked tensions in Israel-U.S. relations in early 2016. During the Obama administration, the U.S. State Department’s spokesperson deemed it a threat to democratic values. Under American pressure, Prime Minister Benjamin Netanyahu ultimately scrapped the proposal from the agenda. German Chancellor Angela Merkel also expressed her opposition to the legislation.

In response to the Likud’s current initiative, the recently established Civil Society Protection Hub, a group opposed to the judicial overhaul operating under the umbrella Democratic Bloc organization, stated that “despite the government’s claims of thwarting a judicial coup, members of the Knesset persistently advocate for the legislation, aiming to dismantle civil society in Israel, mirroring the situations in Russia and Hungary.”

“If the bill were to be approved, it would lead to severe damage and the closure of numerous NGOs across various sectors, including women’s organizations, environmental groups, LGBT rights organizations, academic institutions, and human rights advocates,” they added.

They also warned that the impact would extend beyond the dissolution of these organizations, “adversely affecting vulnerable populations that rely on their support and protection.”