In an unprecedented measure, the Knesset Finance Committee unanimously approved Wednesday evening a bill that would lower the maximum salary ceiling for executives in financial corporations from NIS 3.5 million to NIS 2.5 million a year, or 35 times the salary of the lowest-paid worker, whichever is lower.

According to the bill, which will now be brought to the Knesset plenum for its second and third (final) readings, executive pay that surpasses that cap would not be recognized as a tax-deductible corporate expense, and would thus be double-taxed through both corporate and employee income taxes.

Finance Committee approves bill limiting the pay of executives in financial corporations

MK Gafni (Archive photo: Itzik Harari)

Prior to the vote, Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) said the ”historic measure” marks the beginning of a process that would help narrow social gaps in Israel. He also praised Finance Minister Moshe Kahlon for supporting the bill.

Tal Nadav of the Banks Association expressed his objection to the legislation, and criticized the fact that it currently applies to one sector only, ”because the gaps will continue to exist in communications, gas, high-tech and real estate.”

Chairman Gafni and the rest of the committee members rejected Nadav`s argument. MK Erel Margalit (Zionist Camp) said, ”Financial corporations are different from other entities. They are part of a monopoly and they were given a license to handle the public`s funds, and they give themselves salaries that are excessive and disproportional to the returns they bring.”

MK Manuel Trajtenberg (Zionist Camp) said the committee should consider expanding the legislation so that it would apply to additional sectors. Chairman Gafni noted that the bill, which he called ”an important social statement,” was supported by all the committee members, from both the coalition and opposition. ”The unreasonable pay gaps between the workers in the economy constitute an intolerable reality which must be brought to an end,” he said.