"I have reservations about the dialogue between the Trajtenberg committee and the protest - as if they added NIS 2 billion the problem would be solved," former Accountant General Yaron Zelekha said this week at the Israel 2021 Conference. "The budget is a mirror image of the main problems, one of which is the lack of competition."
According to Zelekha, who heads a new committee charged with lowering prices in the Israeli car sector, "Each industry needs to be examined individually and deconstructed. Let there be no doubt - the car sector is going to change. If somebody doesn't know what needs to be done, he should copy what I'm doing."
Zelekha added: "I have finished appointing people to the committee; there will be recommendations by the end of the year." Many of the scores of sectors are uncompetitive, he said.
"They need to be taken apart and split up. This isn't an easy task because there are 60 or 70 sectors, but a team of 20 to 25 people can set up subcommittees. The question is whether anyone will appoint the first 20," he said.
"This isn't going to take a week but rather two to four years, because to take a monopoly apart you need time, but not too much time."
In the meantime, prices must be supervised in sectors controlled by monopolies, he said. Even an economist like Adam Smith said the invisible hand brings maximum profits and minimum poverty, but only if all the players have equal power. Otherwise there's maximum poverty and minimum profits.
Israel also has to advance privatization, Zelekha said, citing his favorite method - transferring assets to the public rather than to a handful of super-wealthy individuals.
Taxes also need to be reformed. "The main problem is the high level of indirect taxes," he said. "This reduces private consumption because it reduces disposable income and thus affects trade and services."
According to Zelekha, "There has to be a dramatic change in how taxes are structured." The lower classes still pay high direct taxes, while rates are reasonable for the middle and upper classes, he said, adding that the problem is with corporate tax rates.
"If it were up to me, I would reduce corporate taxes to only 25%. I was wrong when I didn't oppose the plan to reduce them to 18%," he said. The cut to 18% is already being expressed in share prices, he said, adding that raising the tax back up to 25% would decrease companies' value by about 8%.
Zelekha added that the big companies don't pay the current corporate tax rate, 24%, but rather only 0% to 6%, if not a bit more. Anyone focusing the discourse on the state budget apparently has an interest in not focusing on the main problem, he said.
"Intel, Teva and Israel Chemicals aren't paying corporate tax of 24%, but rather about 6%. We have to take them on zenga zenga," he said, borrowing from Muammar Gadhafi and his threat against the Libyan rebels. Zelekha said Israel had to "make a tax arrangement for each of them and tell them 'No soup for you.'"
He added, "The maximum leeway in a closed budget is NIS 10 billion to NIS 12 billion. The main problem is that our purchasing power is lower by NIS 100 billion to NIS 200 billion."
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