Arye Dery Proposes Zero Tax for Businesses in Israel's Far Periphery

Unveiled at industry conference, plan takes top treasury official by surprise.

Arye Dery.
Alex Kolomoisky

Aryeh Dery, the minster for Negev and Galilee Development, told an industry conference in Eilat on Thursday that he is working on a plan to reduce corporate income tax for companies in what he called the far periphery to zero.

The zero tax, a reduction from the 6% the companies that would qualify pay now, would be in effect for 10 years under a plan Dery said he was working on with the economy and finance ministries. The zero tax would be offered to businesses that are entitled to benefits under the law for Encouraging Capital Investments.

Although Dery said he was working with the treasury, the ministry’s budget director, Amir Levy, who was attending the conference, was visibly surprised to hear the news. Sources said it appeared that Dery was discussing the idea directly with Finance Minister Moshe Kahlon.

“We are close to an agreement. It can’t be that tax benefits and grants in Yokneam and Kiryat Gat should be identical to those in employment trouble spots and the geographic periphery. Still we don’t want to hurt what exists now because we need stable policy, too,” Dery said.

Dery, who leads the ultra-Orthodox Shas party, has been pursuing a “social” agenda and overcame treasury opposition earlier this month to exempting public transportation fares from the 17% value-added tax. Before that, he stepped down as economy minister to take his current role and let Prime Minister Benjamin Netanyahu fill the post to clear the way for the gas framework agreement to be approved.

Netanyahu announced this week that the ministry would be renamed the Economy and Industry Ministry, a step Shraga Brosh, president of the Manufacturers Association, lauded.

Industrialists had been disappointed when the Industry, Trade and Employment Ministry had been redubbed the Economy Ministry two years ago by Naftali Bennett when he took over the portfolio. Many interpreted the move as Bennett’s downplaying the importance of manufacturing.

On Thursday, Dery said that he had originally proposed the change during his stint as economy minister.