Knesset Panel Opposes Tax Breaks for Multinationals

But matter remains in hands of committee's chairman

Zvi Zrahiya
Zvi Zrahiya
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Zvi Zrahiya
Zvi Zrahiya

The Knesset Finance Committee is demanding that multinational companies in Israel pay their taxes in full - in response to discussions inside the Finance Ministry and the Israel Tax Authority about granting such firms tens of billions in tax breaks.

Chairman Moshe Gafni (United Torah Judaism ) convened the committee on Monday to make it clear that he - and his committee - expect the treasury to collect the maximum amount of taxes from the companies at a time when the state is faced with huge budget deficits and is proposing cutbacks in spending.

The debate concerns the tax rate that Israel will impose on multinational companies that have accrued profits over the years in Israel, and now want to send the money overseas, as dividends. At stake is some NIS 100 billion.

"These are large amounts of money that could solve all our budgetary problems. If these taxes are paid, the budget cuts would be made superfluous," said Gafni.

Treasury officials told the committee the state could add NIS 15 billion to its coffers from the taxes at a time when state revenues are coming up short of forecasts for the year.

"We are heading for a difficult period. In this case, we are talking about astronomical sums," said Gafni.

The treasury must take emergency measures to raise the highest amount of revenue possible from the companies, he said.

"None of them will be hurt. Between the alternatives of compromising on education, health, welfare or levying decrees on the public - and between taxing the companies - it is preferable to raise the maximum amounts of tax from these huge companies," he said.

The tax debate is focused on multinationals like Intel and Teva that have accepted state aid under the Law for the Encouragement of Capital Investments, which has entitled companies - including some of the world's largest - to billions of shekels in state support over the years.

The law was recently amended to allow them to repatriate profits, but does not apply retroactively. The list also includes such firms as Check Point Software, Motorola and Amdocs.

"Steinitz wants to give a prize of billions to huge companies that operate in Israel, without justification," said Meretz head Zahava Gal-On. "The treasury is giving in to extortion."

Tax Authority officials said Finance Minister Yuval Steinitz has yet to make a decision on the matter, and they are still busy collecting data.

The treasury says it is still unclear how much money is actually involved, though it acknowledges the amounts are very large.

Moshe GafniCredit: Olivier Fitoussi