FM Lapid at Eilat conference 370.
(photo credit: Yossi Zamir)
Pharmaceutical Giant Teva will releasing 'trapped profits' and pay the state of
Israel NIS 2.54 billion, including back taxes from 2005, the company announced
Monday night, just hours before an incentives law expired.
the company, it will pay NIS 2 billion (including a NIS 336m payment it made in
may) in the framework of the 2012 "trapped profits law," which expires at
midnight Monday. It will pay NIS 840m for tax assessments from 2005-2011, and
another expected NIS 833m. for its 4th quarter results.
“We have reached
a beneficial agreement for Teva and the Israel Tax Authority concerning the
release of trapped profits and the closure of pending tax assessments." said
Eyal Desheh, Acting President and CEO of Teva. “The agreement generates sources
for dividends to our shareholders for years to come and settles tax assessments
which had been in dispute for a long time." Desheh stepped into the role
temporarily after former CEO Jeremy Levin was pushed out of his position at the
end of October.
Monday's announcement follows intense negotiations with
the Tax Authority, which hoped to collect NIS 3 billion in trapped profits
before the laws expiry. On Sunday, Israel Chemicals came to a similar agreement
to pay NIS 380m.
Finance Minister Yair Lapid said he was "happy that Teva
also made the right decision in its choice to release some NIS 33 billion in
trapped profits." He promised to find a balance between the job creation that
tax incentives can spurn as they attract international companies to invest in
Israel, and the Treasury's tax revenues.
A May Finance Ministry report
elicited a public outcry when it revealed that Teva and Israel Chemicals
alongside Intel Israel and Check Point - Israel's four biggest companies, had
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%.
reacted sharply at the time, last week he seemed to soften his stance on the
usefulness of corporate tax breaks to encourage investments.
“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," he said.