Minister Erred on Corporate Tax Figures

Deputy Finance Minister Yitzhak Cohen issued a correction on Tuesday, admitting that the actual rate paid was considerably lower.

How much tax do Israel's biggest companies actually pay, on average? It turns out that the figure of 7.9% that government officials had told the Knesset last week was grossly overstated

Deputy Finance Minister Yitzhak Cohen (Shas ) issued a correction on Tuesday, admitting that the actual rate paid was even lower, considerably so.

The figures presented by Cohen came in response to a query from Meretz chairwoman MK Zahava Gal-On on taxes paid by the top 1% of companies, in terms of revenues, that benefit from the Encouragement of Capital Investments Law.

Cohen said the average tax rate paid by those companies was actually just 2.9% in 2009 on earnings of NIS 2.8 billion, and just 3.3% in 2010 on NIS 4.8 billion in income.

The deputy minister claimed the 7.9% rate he had erroneously reported previously was provided him by the treasury.

"A sham by the treasury has been exposed," said Gal-On. "These huge companies paid tax at a scandalous rate of 3.3% on billions in income, half the amount claimed by the Finance Ministry just last week. We are talking about unfathomable amounts in exemptions, reflecting the outrageousness of the government's desire to increase the Value Added Tax on the lower income groups."

Gal-On said the true figures show that the effective tax rate on companies benefiting from exemptions under the Encouragement of Capital Investments Law is one-ninth of the official corporate rates for 2009 and 2010 - 26% and 25%, respectively.

"The disclosed figures show that if the top 1% of the companies had paid full taxes for those years, the state would have generated additional revenues of NIS 646 million in 2009 and NIS 1.04 billion in 2010," Gal-On claimed.

" (Prime Minister Benjamin ) Netanyahu insists on closing the budget deficit through measures that harm the lowest income groups - widespread cuts in social welfare services and raising the VAT - when it turns out all that is needed is to stop giving irresponsible exemptions to gigantic companies earning billions while paying ridiculous tax rates," continued Gal-On.

"These figures have the words 'crony capitalism' all over them" she said.