The national fraud squad predicted Wednesday a fresh round of arrests as part of the investigation into suspected large-scale corruption at the Tax Authority, which includes claims of bribe-taking in exchange for tax breaks to businessman and political figures.

The prediction comes on the heels of a series of initial arrests as part of the investigation, among them the director of the Tax Authority, Jacky Matza, his predecessor Eitan Rub and Prime Minister Ehud Olmert's bureau chief Shula Zaken.

Finance Minister Abraham Hirchson decided Wednesday against appointing of an interim director at the Tax Authority, despite Matza's arrest. (Click here for a who's who of the affair)

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Hirchson met Wednesday with the senior officials at the Treasury to discuss the response to the investigation into the alleged corruption.

Senior Finance Ministry officials said that the general feeling during the meeting was very unpleasant. They said that even if only some of the allegations are proven, it would be tantamount to an earthquake.

The finance minister said earlier Wednesday in response to the affair that he was "sure that Israel Police will effectively and responsibility take care of the issue, as it does with every matter."

Attorney General Menachem Mazuz and State Service Representative Shmuel Hollander said Wednesday they would consider suspending state officials suspected in the affair.

The Attorney General's Office said Wednesday that "at this stage, in accordance with the needs of the investigation, the suspects have been distanced from their places of employment by way of the criminal justice system.

"At the next stage, in accordance with the development of the investigation, we will consider the need to take administrative procedure including the possibility of suspension according to the state service law."

A senior Justice Ministry official said Tuesday that the fraud and bribery allegations against the former and current Tax Authority directors has "strategic importance for the rule of law in Israel."

"If there was ever a question as to what is the connection between wealth and power," the official continued, "this affair is the clearest imaginable case of a corrupt connection between business and government."

Police suspect that Matza and Rub appointed to key positions people who would be acceptable to the two businessmen, Yoram Karashi and Kobi Ben-Gur.

The allegations are that the appointees then helped Karashi, Ben-Gur and their associates to obtain tax breaks.

Police also suspect that Matza and Rub accepted or mediated bribes in exchange for pressuring their subordinates to grant tax breaks to various businessmen. However, it is not clear what kind of bribes were involved, as senior police officials declined to say whether they consisted of cash or other benefits.

Zaken was also questioned Tuesday, on suspicion that she was behind Matza's appointment to the job. Olmert was finance minister at the time, and Zaken, who is Karashi's sister, served as office manager for Olmert at the time. Police also suspect that after Matza's appointment, Zaken utilized his good offices to help her brother, a Judaica merchant and Jerusalem city councilman for the Likud Party.

Matza and Rub were remanded on Tuesday for six and three days, respectively, while Karashi and Ben-Gur were remanded for eight days each. Zaken was placed under house arrest for 10 days.

Senior police officers claimed Tuesday that "many" Tax Authority officials were appointed at the request of Karashi and Ben-Gur, first and foremost the authority's deputy director for human resources, Shmuel Bobarov. Police suspect that Ben-Gur, an accountant, worked to get Bobarov appointed, after which Bobarov appointed many other compliant people to key positions.

The investigation had been kept under wraps for the last 10 months, during which time the police wiretapped phone calls among the various suspects. Police say these wiretaps are incriminating.

The probe was revealed on Channel 10 television Monday night, and on Tuesday morning, police conducted a massive raid on the homes and offices of 20 suspects, confiscating many documents. The suspects were also taken in for questioning for the first time.

Law enforcement officials said they hoped Channel 10's disclosure had not damaged the probe. However, they noted, that report gave the suspects several hours to destroy evidence before the police could mount their raid.

According to the police, businessmen influenced decisions at the Tax Authority for years, and this continued until very recently. Ben-Gur, for instance, was close to Rub for many years, and he allegedly used this connection in order to further his business with the authority.