Knesset Members, Yowling Over Corporate Tax Breaks Is Hypocrisy

The charlatans in Knesset seem to forget who granted the tax breaks in the first place.

Yoram Gabison
Yoram Gabison
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Yoram Gabison
Yoram Gabison

After endless public argument, the Israeli Tax Authority has released the list of companies that got tax breaks in 2006-2011. At the top of the list is pharma giant Teva, which received tax breaks of NIS 11.8 billion during this stretch.

Members of Knesset, the body that authorized every one of these benefits and made sure to enact them as laws, are now wailing and pointing fingers, and competing with one another to see who can criticize these companies the loudest.

With the same casualness with which they granted benefits to Teva, Intel, Israel Chemicals and Check Point, now they're howling at the companies - none of which forced the Knesset or the government to vote for the breaks.

Teva, for example, received tax breaks for building a new industrial plant in Jerusalem. The need for benefits to set up shop in the nation’s capital stemmed from the fact that Jerusalem – thanks to mayors such as Ehud Olmert – is becoming a poverty-stricken, backwards city, with no sources of employment, liable to cause any reasonable human being to flee. Jerusalem’s leaders destroyed the city in reprehensible political deals, pouring bundles of money into institutions most of which have one thing in common: They do not generate income.

The disingenuousness of the criticism is also rampant when it comes to measuring the size of the tax breaks. While the large companies did indeed receive enormous benefits, their employees were certainly taxed by the treasury. Take the employees at Israel Chemicals, which received a tax break of NIS 458 million in 2011 alone: They paid taxes of NIS 415 million in 2012. This counts only the first circle of employees, and doesn’t include the company’s providers, which also pay income tax and National Insurance Institute taxes.

Employees at Israel Chemicals, which is responsible for 20 percent of production in the Negev, paid NIS 291 million to the National Insurance Institute in 2012. The NII is the same institution whose kitty is rapidly being drained by the part of Israeli society that receives full civil rights without carrying out a single civic duty.

Another problem with how the arithmetic is employed emerges in the discussion about the product generated by the tax benefits. When Intel, employing engineers in Kiryat Gat, gets a tax break, how is the engineers’ contribution measured when they embark on a start-up and sell it to a giant American software firm? Can we disregard the possibility that, had Intel not employed them, trained them and given them critical experience in the field, the treasury wouldn’t have succeeded in collecting the taxes on the sale of the start-up?

The criticism of the tax breaks is based on the laughable belief that Israel is capable of forcing large multi-national companies to pay full corporate taxes. The willingness to change the tax benefits given with full legal backing and with binding agreements with the companies rests on the assumption that changes will have no effect on the investments levels and future growth ion Israel. Both beliefs are unfounded, certainly not in a world that is still mired in one of the longest global recessions ever, a world in which globalization is a fact of life, just like gravity.

An employee collecting newly-manufactured pills from a machine at the tablet production plant at Teva's headquarters in Jerusalem.Credit: Bloomberg

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