The Knesset plenum on Wednesday approved in a preliminary reading a bill authorizing the Interior Minister to sign a “Heter Iska” (transaction permit). The bill is sponsored by MK Yinon Azoulay (Shas) and a group of MKs.
The bill proposes that the Interior Minister be empowered to sign an official blanket transaction permit on behalf of all local municipalities in Israel, so that collection and disbursement procedures in local authorities will be carried out without fear of violating the Torah’s prohibitions against interest.
Charging interest on loans is prohibited by the Torah, which views it as having a severely negative influence on society. The Torah advocates interest-free loans as a means of elevating both the financial and spiritual status of lender and borrower. However, as early as the time of Hillel the Elder, the sages have come up with creative methods of bypassing Torah law in these cases, because otherwise the market would face stagnation that penalizes the poor.
One such device is the Heter Iska, which turns lenders and borrowers into partners: a merchant wishes to embark on a promising transaction and needs money, the bank gives him the money, but not as a loan. Instead, bank and borrower become partners in the future transaction, and instead of interest, the bank receives its due profit from the deal.
The problem with this legal fiction is that in business partnerships both parties stand to gain or lose together, while Israeli banks that post Rabbinical Heter Iska certificates on their walls have never in the history of the Jewish State given up their pre-agreed “profit,” no matter how badly the borrower’s transaction had gone.
MK Azoulay explained in his comments accompanying the bill: “A significant number of the citizens of the state conduct negotiations and payments both as taxpayers and as suppliers vis-a-vis their local government, however, unlike in the banking sector, many municipal authorities do not sign a transaction permit. In halakhic terms, this means that a person who owes money to a local government, or the local government that owes money to a supplier, would likely transgress what most of the halakhic authorities agree conflicts with the prohibition on interest-bearing loans.”
But the new bill might present an even worse perversion of Torah law: while the common Heter Iska still applies directly to the owners and managers of each individual bank, the MK Azoulay arrangement stretches the fiction much further, making the transaction permit as generic and meaningless as the sale of one’s Chometz on Erev Pesach to some proverbial gentile one had never and would never meet.
The difference is that even when using a legal fiction to get rid of one’s chometz, one can still rely on the declarations that the chometz in question is meaningless to them, “like the dust of the earth.” But when one pays a real estate tax bill with interest to a city hall that’s covered by a blanket Heter Iska from the Interior Minister – that’s very much a violation of Torah law.