Labor chairwoman Shelly Yacimovich 370.
(photo credit: Marc Israel Sellem)
Opposition Leader Shelly Yacimovich slammed Finance Minister Yair Lapid over the
low rate of taxes he extracted from several big companies and for releasing
“trapped profits” under a law that expired at midnight on Monday.
well-coordinated play between Lapid and [pharmaceutical company] Teva, Teva
released trapped profits for a tax payment of less than NIS 2 billion, and the
public is expected to applaud. What does this mean? That Teva is paying a 5% tax
on profits of NIS 35b.,” Yacimovich wrote in a Facebook message late Monday
Trapped profits are profits earned by multinational corporations
that were given tax breaks to invest in Israel.
The Finance Ministry is
looking to give incentives to the companies to reinvest some of it back in the
Since Sunday, Teva, Israel Chemicals and Check Point announced
that they would release billions of shekels in these trapped profits before a
2012 amendment to the law on the encouragement of capital investments expired,
allowing them to pay a reduced tax rate in exchange for releasing the money. The
profits had been “trapped” by skewed tax incentives, which made the companies
reticent to pay them out.
Yacimovich called the announcements a “spin
worth something like NIS 10b. in tax,” and suggested it would be better for
companies to pay full taxes like “regular people” and “regular companies,” who
could only “dream of” such a reduced tax rate.
Only a handful of
companies are able to take advantage of the country’s capital encouragement law,
which provides massive tax breaks in exchange for large capital investments,
especially in the periphery.
Meretz leader Zehava Gal- On demanded the
formation of a commission to investigate the deal, which she called “a serious
crime against the citizens of Israel.”
“There is no reason for the Tax
Authority to collect NIS 4.3b. in the framework of trapped profits – it should
have collected NIS 30b.”
On Tuesday, Lapid touted the NIS 4.3b. of
extracted taxes from the companies in negotiations with the Tax Authority,
noting that it was “far more than expected. It’s much, much more than all the
cynics and the mockers said we would bring.”
The Tax Authority had
calculated a tax intake of NIS 3b. from trapped profits.
“Now that the
dust has settled, let’s remember another thing: Teva, Check Point and Israel
Chemicals are not the enemy,” Lapid said. While they should pay higher taxes, he
argued, the companies provide high levels of economic benefit for the economy
and would set up elsewhere if there were no tax incentives.
“They are the
largest employers in the economy, and tens of thousands of people make their
living from them” directly, while hundreds of thousands work in jobs that
service the companies, he wrote.
Broadcom vice president Shlomo Markel
agreed that the multinational corporations needed incentives to outweigh the
heavy bureaucracy and relatively expensive labor in Israel.
“Israel has a
problem – we’re not a cheap country. For a long time, companies haven’t
come here for cheap labor. With the current exchange rate, we’re even
expensive,” he said in an interview with The Jerusalem Post
The tax incentives should be focused on ensuring that companies
create high-level jobs. Otherwise, the money would be better spent on spurning
better-quality high education, research, and improved
Lapid is expected to address the issue in a Knesset
session on Wednesday.