Yacimovich slams Lapid over low tax rates on released profits

Opposition leader suggests it would be better for big companies to pay full taxes like “regular people” and “regular companies”.

November 12, 2013 20:47
2 minute read.
Labor chairwoman Shelly Yacimovich

Labor chairwoman Shelly Yacimovich 370. (photo credit: Marc Israel Sellem)


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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.

“In a 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 night.

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 country.

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 on Tuesday.

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 infrastructure.

Lapid is expected to address the issue in a Knesset session on Wednesday.

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