Finance Minister Yair Lapid and the CEO of Teva Pharmaceutical Industries have agreed to launch intensive talks on the amount of tax Teva pays, after Lapid insisted that the company must receive fewer breaks.
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Teva, the world’s largest generic drug company, has been in litigation with the state on the issue. The meeting with Teva CEO Jeremy Levin was Lapid’s initiative − the first time the two have met since Lapid became finance minister in March following the January 22 Knesset election.
In 2011, Teva paid a corporate tax rate of 0.3%, news that stirred a public outcry during a year of social protest in general. Teva is in a dispute with the state over tax payments on so-called trapped profits, profits earned in conjunction with a law that gives multinationals incentives to invest in Israel. Under this law, companies are taxed at 25% if the profits are transferred out of the country.
In its 2012 annual report, Teva said it was sitting on $15.1 billion in trapped profits. It said that that if it paid dividends on these earnings, it would have to pay $2.13 billion in tax, but instead intended to reinvest the money in Israel.
At his first news conference as finance minister on Wednesday, Lapid discussed corporate tax levels, saying that if companies paid more tax, the proposed austerity measures affecting individual Israelis could be eased.
He said that though it was appropriate for major corporations to pay more in tax, companies should not fall victim to a unilateral effort by the government that would violate existing agreements. Unilateral action would make multinational corporations flee the country, Lapid said.