State Comptroller slams Israel's big businesses for hoarding profits

Joseph Shapira calls on state to ensure natural gas benefits entire population, not just minority that holds much of country's wealth.

By YONAH JEREMY BOB
State Comptroller Shapira hands Edelstein report 370 (photo credit: Courtesy of Knesset)
State Comptroller Shapira hands Edelstein report 370
(photo credit: Courtesy of Knesset)
State Comptroller Joseph Shapira on Tuesday rapped business tycoons in Israel, accusing them in his new report of taking advantage of tax loopholes to amass fortunes, to the detriment of ordinary Israelis.
The comptroller has devoted his term in office to socioeconomic issues and to championing the rights of the downtrodden and weaker sectors of society.
Shapira, in a report handed to Knesset Speaker Yuli Edelstein on Tuesday morning, warned of the phenomenon of giant companies and tycoons hording their profits through a maze of loopholes. “It is not reasonable” for this to continue, Shapira said, while “portions of the population are struggling under the burden of taxes and the high cost of living.”
The report said that in general the Tax Authority has done a poor job of enforcing the law for those trying to avoid their taxes, especially in investigating fictitious accounts which violators use to dodge payments.
In other sections of the report that focus on the economy, Shapira reiterated that much of Israel's wealth is in the hands of a minority. One quarter of companies listed in Israel belong to just 25 business groups, and the 10 largest business groups make up 30% of the market, putting it among the highest concentrations in the West. This is not only bad for business, the report said, but poses systemic risks to the economy because of overexposure to credit risk.
In the sections on Israel’s financial bodies - the Bank of Israel, the Israel Securities Authority and the Finance Ministry - Shapira found a low level of readiness on keeping businesses running in the event of a national emergency. While the Finance Ministry had contingency plans for war, it said, it did not have plans for other disasters, such as cyber attack, earthquakes, floods or terrorist attacks on Israel's infrastructure.
The report also found that despite laws meant to protect consumers, there was no clear address for consumers to turn to with complaints, a lack of enforcement, and ineffective deterrence for businesses not to break the law.
In another major theme of the report, Shapira took to task the Energy and Water Ministry and the government as a whole, saying it must take the necessary steps, “without any further delay,” regarding the country’s location and extraction of its natural gas resources off the coast to “prevent a large ecological disaster” in the Mediterranean Sea.
Shapira also warned of potential ecological disasters occurring from natural gas extraction, if proper measures are not taken.
The comptroller said that despite some progress on issues relating to major natural gas supplies discovered in 2004, overall it was “not enough” and was moving forward “at too slow a pace,” both in terms of safety and in terms of meeting the state’s immediate energy demands.
He also expressed concern that the state was not providing sufficient encouragement for competition in the location and extraction of the gas, with only one supplier holding a monopoly.
Turning to environmental issues, Shapira said that the government had still failed to implement warnings from previous reports and government decisions on the security and safeguard of dangerous substances held by various government and businesses around the country.
In the area of defense, Shapira said that a classified system designed to enhance the military's ground forces is seven years behind schedule, and the delay is affecting the IDF's capabilities.
The system was supposed to go online at the end of 2005. At the time of the writing of the report, November 2012, the army system is still under development, Shapira wrote.
The report also touches on a number of other issues, such as problems with supervision of illegal transfers of drugs, money and weapons through the Ben-Gurion Airport.
Next, the report discusses problems with balancing investing and use of public housing for weaker sectors of society, as opposed to the current situation in which public housing is being misused for offices, synagogues and even vacation homes.
The report also criticizes deficiencies in public offerings to complete projects on behalf of the state, noting specifically an offering regarding 370 million euros funding relating to Israel Railways.
Shapira also criticized deficiencies relating to establishing a new light rail in Tel Aviv, as well as the government’s failure to implement its decision to move more government offices from other cities to Jerusalem, to consolidate the government’s presence in the capital.
 Niv Elis and Yaakov Lappin contributed to this report.