Despite Denials: Lapid Sought Formal Opinion on Bill Benefiting Milchan, His Hollywood Mogul Friend Embroiled in Netanyahu Scandal

After the police recommended charging Netanyahu with bribery in two corruption cases, Lapid said he had rejected attempts by Milchan and Netanyahu to push the bill through

(L-R) Singer Einat Sarouf, Arnon Milchan and Yair Lapid at a club in Tel Aviv, 2004.
\ Moti Kimche

In his former role as the finance minister, Yesh Atid leader Yair Lapid had asked for a professional opinion from the treasury on a law that would have doubled tax breaks for wealthy expatriate Israelis returning home before scuttling it, rather than rejecting it outright, like he has claimed.

The amendment to the law would have benefitted Lapid’s friend Arnon Milchan, an Israeli Hollywood producer who is also an associate of Prime Minister Benjamin Netanyahu. It would have extended the duration of tax relief on gains made overseas for wealthy Israelis who came back to Israel after living abroad from 10 to 20 years. The original tax benefits legislation for returning Israelis is known as Milchan's Law.

After the police recommended charging Netanyahu with bribery in two corruption cases two weeks ago, Lapid said he had rejected Milchan’s and the prime minister’s attempts to push the bill through. “I simply said, ‘under no circumstances’ and that was the end of it,” Lapid wrote on Facebook at the time.

However, Haaretz has learned that the process was not quite that straightforward: Before rejecting the prime minister’s plea, Lapid requested that Finance Ministry officials deliver their professional opinion on the bill which would affect his friend.

In August 2013, the Finance Ministry’s budget division was asked to issue an opinion on the bill by Lapid’s economic adviser, Rotem Rolf. Budget division officials understood that the matter had arisen after Lapid held a meeting with someone. They assumed it was a rich Israeli living abroad, since the bill was expected to benefit tycoons.

Within several days, they produced a five-page opinion which elaborated criticism of the bill. Rolf then held a meeting with the officials to inquire about their opposition and possible alternatives.

Lapid and Rolf declined to comment on this report.

The amendment has become part of the so-called Case 1000 investigation into suspicions that Netanyahu accepted gifts such as cigars and pink champagne from Milchan, in exchange for which the prime minister pushed for the amendment, among other things. Milchan stood to save tens of millions of shekels as a returning expatriate if the extension had passed.

According to investigators, Netanyahu contacted Lapid twice about advancing the bill while the latter held the finance portfolio. In his testimony to the police, Lapid attested that Milchan had first turned to him about the issue in 2013. Lapid said he refused the request. He said that two days after his refusal, Netanyahu asked him if he had spoken with Milchan and urged him to advance the amendment. Lapid testified that he also refused Netanyahu’s request. Lapid said he met Milchan again with Rolf, and once again declined to advance the legislation. He testified that Netanyahu then asked him a second time, and he also refused to help.

Milchan’s name is not listed in Lapid’s conflicts of interest disclosure.

In a television interview the day after his testimony was published, Lapid said that he could not elaborate on the matter because it was still undergoing legal proceedings. When asked why he would agree to meet with Milchan to discuss the issue, even though the two were friends, Lapid responded: “It’s a fact we did things properly with the Justice Ministry and in the presence of the Finance Ministry.” He added: “The bill didn’t pass. I didn’t agree to pass it.”

Some days later, Lapid wrote of his meeting with Milchan on Facebook: “When at the Finance Ministry, I met Arnon Milchan very little ... In 2014, when he wanted to extend the ‘Milchan Law,’ I notified him explicitly that I opposed it, and blocked it together with Finance Ministry officials. I will not delve right now into the prime minister’s involvement in the subject, because it’s under discussion in court, but I did my bit.”

The opinion of the budget department, obtained by Haaretz, argues that the amendment would not actually promote immigration to Israel. Furthermore, the tax breaks would create discrimination between veteran residents and new immigrants. Extending the length of the tax breaks would increase inequality, the opinion states, adding that the bill would motivate people to invest their money outside of Israel.

The officials summed up that they cannot recommend extending the duration of the law. If anything, they urged immediately abolishing the exemption from reporting overseas income given to new immigrants. They noted that depending on the efficacy of tax breaks, at a later stage the government could consider extending the tax breaks against a significant investment in Israel.