Lapid appoints committee to examine tax benefits for companies investing in Israel

Critics note unfairness of big companies to pay less tax while small businesses pay the full corporate tax rate.

Lapid looking sharp 370 (photo credit: Marc Israel Sellem/The Jerusalem Post)
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 argued.
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 ways.
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 companies.”
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.
The 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.