Knesset Committee approves ‘trapped-profits’ bill
Finance body approves second and third readings of a bill to release “trapped profits” of multinational corporations.
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The Knesset Finance Committee on Sunday approved the second and third readings
of a government bill to release “trapped profits” of multinational corporations.
The move is expected to boost government coffers by NIS 3 billion next
Until now, the Law for the Encouragement of Capital Investment has
exempted certain multinationals from paying company and dividend taxes as long
as they invest their profits in further activities in Israel.
bill, corporations will be permitted to release part of their trapped profits
for investment abroad as long as they agree to allocate at least half of the
profits to investments inside Israel. In return, the state will charge them a
reduced company tax rate of 6 percent to 17.5%.
chairman Moshe Gafni (United Torah Judaism) said the measure would change the
existing situation in which no government from any side of the political
spectrum could touch the multinationals’ profits. He estimated that the
companies had withheld NIS 120b. from the state since the introduction of the
original law to encourage capital investment.
Finance Minister Yuval
Steinitz praised Gafni for “displaying maturity and responsibility” by assuring
the bill passed in the face of “populist criticism.” Particularly now, he added,
it is vital to make practical decisions and to continue to safeguard the Israeli
economy for the benefit of its citizens.
Tax Authority director Doron
Arbeli said the committee’s decision and the consent of corporations to invest
half their profits in Israel have created “a correct and fitting
Deputy Attorney-General Avi Licht backed the bill, but said
multinational corporations’ profits had never truly been trapped. Over the years
corporations had redistributed a portion of their profits through subsidiaries
abroad, he said, and the Israel Tax Authority has been unable to keep track of
Among the opposition voices, Labor chairwoman Shelly
Yacimovich said she could not understand why the government rejected the path
suggested by her and by the industry, trade and labor minister, which would have
provided incentives for companies to reinvest profits inside Israel. The 50%
corporations will be required to invest in Israel under the amendment is not
sufficient, she said, recommending that it be raised to at least
Meretz leader Zehava Galon said those who were already paying tax to
release profits were “suckers.” Calling the bill “government-assisted money
laundering,” she said it gave preference to immediate cash flow without taking
into account the long term.
Kadima, Yisrael Beytenu and Hadash MKs also
criticized the bill, with MK Shlomo Mollah (Kadima) questioning how the
government could consider NIS 3b. out of a total NIS 120b. sufficient when the
cost of living is still rising and more public-expenditure cuts are still being