Agricultural co-ops exempt from capital gains tax

Exemption will encourage structural changes and competition.

The interministerial socio-economic committee approved a proposal by acting Finance Minister Ehud Olmert and Agriculture Minister Yisrael Katz to grant a four-year exemption from taxation on capital gained from the realization of assets of agricultural cooperative corporations, the Finance Ministry said Monday. The exemption was expected to encourage structural changes within the agricultural cooperatives, such as the Tnuva dairy cooperative, to improve the financial management of the cooperatives, and to promote competition in their sectors of activity, the ministry explained. Only funds used to cover the agricultural sector’s obligations resulting from arrangements to service debts of kibbutzim and moshavim will be eligible for the exemption, which will come into force on January 1, 2006. After the four-year exemption period in 2010 and 2011 a reduced level of tax will be levied on agricultural asset realizations by moshav and kibbutz corporations and their members. The deal would not require expanding the state budget, and instead would make use of untapped sources at the disposal of the agricultural sector, the ministry said. The move, it added, also likely would advance the transformation of Tnuva into a company and increase competition within the dairy sector, to the benefit of consumers. Most assets of the agricultural sector such as factories, purchasing organizations, water associations, and various cooperatives are not able to be realized due to the existing structure of the sector’s cooperative corporations, the ministry said. “The agricultural sector is faced with immense amounts of debt... and the absence of sources needed to pay those debts. Additionally, the corporation structure renders fundraising difficult, as well as contacts with external investors, and hurts the business management of these bodies in a competitive market,” the ministry said.
More about:Ehud Olmert