A senior Israel Tax Authority official spoke out over the weekend in favor of officials involved in negotiating tax payments on the Cellcom deal, in light of attacks last week that the authority had settled for less than reasonable. The official termed the criticism "nonsense."
On the contrary, "we managed to collect any taxes only by a miracle", he claimed, thanks to a delay in the implementation of a double taxation pact between Israel and Brazil.
In the deal, Nochi Dankner's IDB Holdings bought a controling stake in Cellcom from BellSouth and the Safra family, which hails from Brazil. Critics asserted that Dankner's involvement had led the Tax Authority to submit to accepting only $40 million. Jack Matza, head of the professional department at the authority and one of three leading candidates to replace outgoing head Eitan Rub, handled the negotiations.
The foreign investors seem to be reaping profit without taxation. BellSouth is indeed exempt and paid no taxes on its gains. In contrast, the Safra family, in the wake of no double taxation pact, would have had to make some tax paytment. The pact only goes into effect this week.
Tax officials claim that because this loophole isn't clear, and all involved were aware that had the pact already gone into effect the Safras would not have had to pay anything, the authority's initial demand was a payment of $80 million. IDB Holdings, which was taking the Safra's place, countered with a $20 million offer. The two sides eventually reached a compromise of $40 million. The senior official asserted the compromise was "fair, which given the circumstances, was a major accomplishment."
The official said the achievement makes the criticism outrageous. He attributed the criticism to the current power struggle and an attempt to damage the chances that Matza would be appointed the new Israel Tax Authority director.
Rub is expected in the near future to recommend Matza to Finance Minister Ehud Olmert as his replacement. Rub leaves the job at the end of this month.
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