Finance Minister Yair Lapid did a 180 on his stance on corporate tax breaks on
Thursday, arguing that they were crucial for making Israel a competitive
destination for global companies.
“We have another tool, called “tax
benefits,” and all the populist shouting in the world won’t make any difference:
We are going to use it,” Lapid said at the Israel Democracy Institute’s Eli
Hurvitz conference on economy and society.
In 2012, he noted, Intel chose
to build a 1 billion euro plant in Ireland instead of Israel because it got
better tax breaks there, depriving Israel of jobs, development in the periphery,
and added tax revenues from workers.
“We need to oversee the tax benefits
for large companies, we need to create better mechanisms for checking them and
increasing efficiency; but we must continue to use tax benefits to continue
bringing Intel, Cisco, Siemens and Google to Israel, because that’s also what
makes us innovative – our relationship with the leading technology companies in
the world,” he said.
The position is a departure from the stringent
stance he took against corporate tax breaks in May, when the Finance Ministry
report found that the four biggest companies – Teva Pharmaceutical Industries,
Intel Israel, Israel Chemicals and Check Point Software Technologies – received
70 percent of all corporate tax benefits in 2010. The NIS 4b. in breaks, given
through the Law for the Encouragement of Capital Investment, reduced their
average effective tax rates to about 3%.
At the time, Lapid pulled
then-Teva CEO Jeremy Levin to a meeting on the issue, at which he told Levin,
“It is time to change the rules of the game on non-taxable income of
international companies and on tax benefits.”
He went so far as to raise
taxes on eligible companies by 2.5-3%.
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When asked to explain the change
of heart, Lapid’s spokeswoman said he did not change his view, but rather wanted
to ensure that tax benefits did not exist for their own sake, but went toward
During the remainder of the speech, Lapid laid out his view
on how to grow Israel as an innovative economy.
springs from three sources, he said: Its diverse migrant population, the IDF,
which selects and trains Israel’s youth in hi-tech fields, and “something in our
To support the latter claim, Lapid name-dropped Freud, Einstein,
Jesus, Kafka and Bob Dylan as examples of influential Jews.
that innovative base, he continued, Israel should focus on four areas:
infrastructure, education, human capital and available capital.
ends, Lapid called for building a 4G wireless network and consolidating the
government’s technological bodies into one.
colleges could help people gain marketable skills, while government-sponsored
training programs could help integrate ultra-Orthodox Jews, Arab women and
workers over the age of 50 into the workforce, he said.
Israeli companies running to NASDAQ in New York to raise capital, as Israel’s
Wix did just a day earlier, Lapid called for broad deregulation, and encouraged
institutional investors to channel funds toward hitech.
The bottom line,
Lapid said, was that Israelis could improve their quality of life through
innovation. “If you do it enough times, it becomes a sort of song that gets
stuck in your brain,” he said.
Opposition leader Shelly Yacimovich panned
Lapid’s address in a speech to the Manufacturers Association of Israel, calling
him a failure.
“This is the finance minister’s plan? Is there no limit to
his empty words and badspiritedness? Is repeating a song so we remember it a
replacement for an economic plan?” she asked.
Yacimovich said Lapid
failed “not only as finance minister but also as a songwriter” and that he was
“simply mocking” the people. “In the last budget, taxes were only on the working
people and on small and medium businesses,” she said.
MK Itzik Shmuly
(Labor), who attended the conference, called Lapid a “world champion in words,
but that is not reflected in the numbers.”
“Only three months ago, Lapid
submitted a budget that will crush the middle class more and more and hurt young
couples, and all his nice talk won’t cover that now. We can’t lower the hammer
on young people’s heads, and then praise them a moment before they collapse,”
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