Housing protest - Nir Keidar - August 2011
Summer protests Photo by Nir Kedar
Text size

We've never seen an outpouring like this of philanthropy, love of one's fellow man and care for the other among the rich.

It started when Warren Buffett, the third-richest man in the world, urged in The New York Times that the government tax him more. With his wealth of $47 billion, he paid just $7 million in taxes last year.

Then came France, whose wealthy, including Maurice Levy, the chief executive of the publishing giant Publicis Groupe, wrote a letter to the government suggesting that it raise tax on people earning more than a million euros a year. Two days later France published an edict raising taxes in general, in which tax on the highest salaries was lifted by 3%. Taxes were also imposed on capital gains and private health insurance policies. No less than 83% of the $17 billion that the decree will bring the French kitty originates with big business and rich households.

In Israel too we're starting to see signs of changes in thought patterns among some of the rich. At the start of the month, billionaire Shmuel Harlap, importer of Mitsubishi, Hyundai and Mercedes cars, proposed a new tax bracket for the wealthy.

Last week Zvi Ziv, former chief executive of Bank Hapoalim, said it might be better if business tycoons weren't allowed to own controlling stakes in banks. Meanwhile, Orni Petruschka, a high-tech entrepreneur who made hundreds of millions of dollars from selling Chromatis, urged Israel to institute estate tax.

Some of these people worked hard and made their money honestly, playing the capitalist game. Others inherited their wealth. Another whole group got rich through legal but dirty means. If they have anything in common it's lifelong efforts to reduce their tax bills, slipping through loopholes in the law and building clever tax structures. Most have paid very little tax, and sometimes none at all.

Some have chosen to give the public back peanuts through donations and charity - a tiny fraction of their wealth, usually donated via publicly traded companies. So it was mainly the public donating to itself, but the business barons got the good press.

So what has changed? Have they seen the light? Do they want to mend their ways? Probably not.

The lobbyists vanish

First of all, if you peruse the list of the well-to-do moaning "Let us pay more tax," you'll find that each isn't what you might have thought.

Buffett, in his 80s, has long since announced that he will be donating his entire fortune to good works. He lives in a modest house and eats hamburgers for lunch. Even if the state took 99% of his wealth in tax, his living conditions wouldn't change.

Zvi Ziv isn't in the game anymore. Word had it he was offered the CEO's position at another bank but refused. Orni Petruschka has been engaging in social endeavors for a decade now, since his high-tech coup.

Shmuel Harlap can be called an alternative car importer: He also has a doctorate in philosophy. (Also true: These guys don't have to worry about starving in their dotage. They, their children and their grandchildren need not fret. )

The bottom line is that this dewy-eyed trend is limited. We haven't been seeing the rich storm the prime minister's home or the Knesset waving signs that read, "The rich want to give back more to the community."

Second, these people know the complexity of the business and international tax worlds. They know that even if taxes are raised, collection is another matter entirely. In many cases their money isn't even held in Israel, it's abroad, invested in all sorts of assets and trusts designed to hide the wealth from the Israeli taxman. It doesn't matter what percent of tax the law imposes if the tax appraiser in Tel Aviv doesn't know about the money. Estate tax is even harder to handle and enforce.

The third reason for the sudden change of heart among the rich is more important. They're confused and, at least in some cases, they're running scared. Not one would admit it. But the body language and the sheer look in the eyes among the uppermost 0.1% in recent weeks shows uncertainty, and in some cases, fear.

These are people who thought they'd beaten the system. They figured they knew how things work. They knew what strings to pull. They knew, or knew how to access, the right people to advance their interests in government. They knew the top officialdom and the right people in the capital market and business sector. They learned how to make money, invest it, earn more and more, and pay less tax. Some thought they were invincible.

Suddenly came the tent protests. Hundreds of thousands of Israelis took to the streets and the tycoons' confidence cracked. In Knesset circles, they say the lobbyists who had thronged the corridors have suddenly disappeared. Suddenly, ostentatious displays of wealth are frowned upon. Glittering events planned meticulously for months have been canceled.

The sudden largesse of the super-rich is, we realize, mainly an attempt at damage control as the criticism mounts. The rich understand they can't make it stop. They figure taxes will be rising, so they're barking out their support for the move. Not only their fear is talking; their logic is too. These are people used to burnishing their images. They know how to spin. If they have to pay more tax, they'd much rather everyone think they're behind the initiative.