Steinitz, Yacimovich spar over trapped profits

Finance Minister Yuval Steinitz and Labor chairwoman Shelly Yacimovich traded barbs over distribution of the “fruits of the tree” on Wednesday, referring to the government’s decision to release the trapped profits of multinational corporations.

Steinitz got the ball rolling at a conference organized by the CFO Forum and PwC Israel, saying: “I hear various politicians talking about distribution, but they have no strategy for growth. They talk about distributing the fruits of the tree, but they have no idea how to grow a tree.”

Referring to Yacimovich’s and Meretz chairwoman Zehava Gal-On’s support for abolishing legislation to encourage capital investment and raising the corporate tax rate, Steinitz said such measures would cause immediate damage to the economy, destroying companies and causing investors to flee.

Yacimovich responded in a press statement that Steinitz has never grown a tree himself, accusing him of distributing everything to his rich friends while leaving only the rotten fruits that fall to the ground for the public.

“It is understandable that Steinitz boasts of his achievements at the CFO forum – after all, these are the same companies to whom he delivered a gift this week through the amendment of the trapped-profits law,” she said.

“But what does Steinitz have to say to the middle class, who pay their full taxes in accordance with the law and struggle to make it to the end of the month?” The Knesset on Monday approved an amendment to the Law to Encourage Capital Investment, paving the way for multinational corporations to release trapped profits at a reduced tax rate of 6 percent to 17.5% in return for reallocating at least half of their profits to investments inside Israel. This is part of a series of government measures aimed at meeting next year’s budget-deficit target.

Steinitz used Wednesday’s speech to reject criticism that the government was effectively conceding tax revenues to the corporations. He said the amendment would deliver more than NIS 3 billion to state coffers from corporations that have contributed nothing for the past one or two decades.

Meanwhile, the Treasury reported Wednesday that the running budget deficit for the first 10 months of 2012 had reached NIS 22.1 billion, compared to NIS 14.5b. in the corresponding period the previous year. This was despite tax revenues rising to NIS 182.6b in the January-October period this year from NIS 175.8b. in the same period last year.