Israeli Finance Minister Talks Taxes With U.S. Treasury Secretary

Kahlon also asked Mnuchin to press the Palestinian Authority to enforce global rules for fighting money laundering and terror finance

Israeli Finance Minister Moshe Kahlon, April 19, 2017.
Ofer Vaknin

In his first official visit to Washington, Finance Minister Moshe Kahlon met with his U.S. counterpart Steven Mnuchin to discuss tax issues and other matters as the Trump administration is seeking big cuts in U.S. rates.

“The Israeli economy is deeply connected to the American economy,” Kahlon said in a statement. “We are closely monitoring the expected tax reform in the U.S. and its impact on the Israeli economy, and if necessary we will make the necessary adjustments.”

The White House has been seeking to cut the U.S. corporate tax rate to 15%, down from the current 35%, although more recently officials have talked about a more modest reduction to 20%. Either way, it would put the U.S. figure well below Israel’s, which dropped to 24% this year and will fall to 23% in 2018.

The two, who scheduled to meet again in September, agreed to form a joint negotiating team to examine the implications of amending the Israel-U.S. double-taxation treaty. The changes aim to adjust the withholding tax rates and improve the tax rights of investors in both countries, remove investment barriers and improve the investment environment in Israel.

Kahlon asked Mnuchin to press the Palestinian Authority to enforce global rules for fighting money laundering and terror finance. For his part, Kahlon said he would urge the International Monetary Fund to complete its audit of the PA’s policies by next year.

On Monday the IMF said the evaluation by its Middle East and North Africa Financial Action Task Force would only be ready in 2020.

Resolving the issue of money laundering and terror finance is critical because Israeli banks could risk U.S. sanctions if they work with Palestinian institutions.

The two also agreed to form two joint committees. One will examine the Trump White House drive now to trim regulations via its “one in, two out” policy of eliminating two regulations for every new one introduced.

Another will look into public-private partnerships for developing infrastructure, a policy both countries are pursing as they try to catch up on years of underinvestment in roads and other facilities.