Netanyahu Investigations Prompt New Israeli Bill Limiting Tax Exemptions

Meretz lawmaker to submit a bill that would amend the so-called Milchan Law, which gives tax breaks to new immigrants and Israelis returning from abroad

Protesters in Tel Aviv hold signs during a rally calling upon Prime Minister Benjamin Netanyahu to step down, February 16, 2018.

A lawmaker from the opposition Meretz party said he plans to submit a bill that would change the law that provides tax breaks for new immigrants and Israelis returning from abroad.

MK Mossi Raz proposes that the current 10-year tax exemption be capped at 100,000 shekels ($28,250) in income and that an exemption on reporting income from abroad be repealed.

The law has been dubbed the Milchan Law, after Israeli Hollywood entertainment mogul Arnon Milchan. The Knesset passed it in 2008, when Ehud Olmert was prime minister. The impetus behind the legislation was Pini Rubin, a lawyer representing Milchan and other moguls.

Meretz lawmaker Mossi Raz
Michal Fattal

Media reports say that Milchan returned to live in Israel in 2009, after the law's passage. He is suspected of illegally providing large quantities of lavish gifts to Prime Minister Benjamin Netanyahu and his wife. Last week the police recommended that the prime minister be indicted on bribery charges in the case, which is known as Case 1000, and in another probe. Police also recommended that Milchan be indicted for bribery for providing the gifts.

Netanyahu has denied any wrongdoing.

Yesh Atid Chairman Yair Lapid told the police that in 2014, while he was finance minister, he was asked by Netanyahu to extend the benefits of the law from 10 to 20 years – a move that would have helped Milchan. Lapid, who had been friendly with Milchan and worked for him about two decades ago, refused.

The Tax Authority very much opposed the 2008 law and has made at least three attempts to amend it, without success. These efforts have only targeted the income-reporting exemption, not the exemption from paying tax.

Raz said that "while there is logic to a law that provides a tax exemption to returning residents, and they exist in many countries around the world, we cannot reconcile ourselves with an exemption from reporting and with the exemption's lack of proportionality."

The lawmaker claimed that his bill would encourage Israelis to return home "in complete transparency and without the assistance that they receive becoming an option through which tycoons can launder money."