Lapid looking sharp 370.
(photo credit: Marc Israel Sellem/The Jerusalem Post)
Finance Minister Yair Lapid on Wednesday appointed a committee to examine The
Law for the Encouragement of Capital Investment, which offers companies tax
breaks for making big investments in Israel.
The law has been at the
center of a heated debate this week, as the Israel Tax Authority convinced big
companies such as Teva, Israel Chemicals and Check Point to distribute “trapped
profits” for a reduced tax bill totaling NIS 4.3 billion. The companies, which
have paid extraordinarily low marginal tax rates due to their investments, had
kept their profits “trapped” because of provisions in the law that they feared
would lead to high tax bills.
“We will work to fix the capital
investments law, to fit it to the needs of the citizens of Israel and to balance
it with the needs of the companies,” Lapid said.
Lower tax rates invite
multinational companies to build plants in Israel instead of competing nations
such as Ireland, provide good jobs and spur economic growth, Lapid has
His critics say it is unfair for large companies to pay minimal
taxes while small and medium-sized businesses pay the full corporate tax rate.
They question whether the money could be better spent in other, more equitable
Teva only paid a tax of about 5 percent on its released profits,
opposition leader Shelly Yacimovich said Wednesday, adding that the large
companies did not pay the same taxes as “regular people” and “regular
Meretz leader Zehava Gal-On said it was “a serious crime
against the citizens of Israel.”
A report in May 2010 found that 70% of
all such benefits were paid out to the four largest companies alone.
committee, to be led by Finance Ministry director-general Yael Andorn, will
examine whether the existing law “strikes the right balance” between benefits to
companies, Israel’s citizens and the economy as a whole, while creating a
mechanism to monitor the law’s effectiveness over time.
“The staff will
find ways to ensure the proper allocation of tax benefits and create conditions
so that the State of Israel will continue being attractive for capital
investments for large international companies,” Andorn said.