The proposed bill has been a legislative priority for the government since Prime Minister Benjamin Netanyahu’s Likud party formed a coalition with hardline and ultra-Orthodox parties at the end of last year.

However, in addition to fierce criticism from some of Israel’s closest allies, including the United States, France, and Germany, the bill, proposed by Likud member Ariel Kallner, has been slammed locally too.

“We see this as a civil society killer,” Joseph Kelly, director at the Jerusalem-based Association of International Development Agencies, an umbrella group for 80 aid organisations working in Palestine, said on Thursday.

The bill was scheduled to be presented to the committee on Sunday but local media reports said the government might postpone that due to the objections it has received. Kallner’s spokesperson confirmed to Al Jazeera that “there are difficulties with this proposed bill” but refused to confirm or deny the media reports.

The bill’s backers have cited the need for taxing the organisations to defend Israel’s sovereignty.

At a special Knesset meeting in March devoted to “anti-Semitism and delegitimisation facing Israel”, Likud member Kallner spoke of the “extent that delegitimisation organizations operate within Israel… and how foreign governments harm Israeli sovereignty” by funding such organisations.

“The bill is an attempt to silence and eliminate criticism of the Israeli government’s conflict-related policy as well as any kind of evidence gathering that might be used by international inquiry commissions or the ICC [International Criminal Court],” Michael Sfard, a lawyer for organisations that advocate for Palestinian human rights, told Al Jazeera on Thursday.

‘Bill will bring about collapse of hundreds of associations’

Experts said private donations and organisations that fund influential right-wing bodies such as the Kohelet think tank which is behind the current Israeli judicial reforms and notorious for its lack of funding transparency, are exempt from the proposed tax.

“The bill, if passed, will bring about the collapse of dozens, perhaps hundreds, of associations and will seriously harm human rights organisations in Israel and the treatment of underprivileged and unrepresented populations,” said lawyer Debbie Gild-Hayo, director of policy advocacy for the Association for Civil Rights in Israel.

“This is a fatal violation of freedom of expression and protest and freedom of association in Israel,” he said, adding that now that the Knesset approved the budget on Wednesday, members from the coalition government are free to promote initiatives aimed at reducing the democratic space.

“It is important to note that this initiative is part of a broader move with an attempt to silence civil society in Israel.”

Explanation of bill

The proposed bill has two main components. The first is an amendment to the Income Tax Ordinance, which redefines what constitutes a “public institution”. It would remove the tax-exempt status of institutions that “[interfere] in the internal affairs of the State of Israel in the two years preceding…”.

One of the activities considered to constitute interference would be “appealing to the court”, a stipulation that Kelly fears is targeted at  Israeli human rights groups, such as Yesh Din and B’tselem, which frequently advocate on behalf of Palestinians and are funded heavily by foreign governments.

The second part of the bill would tax any “donation that interferes with the internal affairs of the State of Israel … at a rate of 65 percent without the right to any exemption, deduction, offset or reduction”.

Dror Etkes, founder of Kerem Navot, an organisation that monitors and researches Israeli land policy in the occupied West Bank, points out that the vast majority of funding for human rights organisations comes from government sources, which would be targeted by the legislation.

What to expect

In 2016, an “NGO transparency bill” was ultimately shelved by Netanyahu after intense diplomatic efforts. Other Israeli actions against human-rights organisations have been carried out without the Knesset, including the advertised closure of 30 financial accounts in 2019 and a raid on six Palestinian human rights organizations in 2022.

Early indications are that the current legislative effort will place an additional burden on Netanyahu, who is already being attacked by close allies for resuming talks to push forward judicial reforms that have caused a wave of anti-government protests this year, continuing to build illegal settlements in the occupied West Bank and East Jerusalem, and approving a permanent Israeli presence in Homesh among other decisions.

Kelly is “sceptical that it [bill] would pass in its present form” and will be amended in some way but remains concerned about the level of struggle that lies ahead for those standing up against perceived abuses of government power.

“We are concerned that the dialogue is moving forward,” he said.