The Bottom Line / A Spineless Blunder

Immediately after taking office, when he was still a green finance minister, Silvan Shalom said that the economy needed no new commission on tax reform and that he personally needed no ceremony with hand-pumping and flashlights. If there was any need to implement changes in taxation, he said, it should be done, and that's it.

But time moves on; and Shalom has become more and more political. Now, he has set up the Rabinovich Committee, which will publish yet another report - differing from the previous one by only one central point: It will be his; and there will be ceremonies, photo opportunities and maybe some press headlines.

To justify the new (ridiculously-inflated) committee, Shalom sold us the tale that the Ben-Bassat reforms had failed because the committee's recommendations were too academic and could not be implemented. Is that so?

Just before the recommendations came to the Knesset, sometime in 2000, then finance minister Avraham Shochat (Labor) met with four leaders of the Likud in the Knesset: Reuven Rivlin, Limor Livnat, Meir Sheetrit and Silvan Shalom. Shochat asked them for their support on the tax reforms, after having removed such items as requested - the tax on advanced training funds (keren hishtalmut), the changes on taxes for working wives, shift work and inheritance tax. All four refused their support, and Shalom said: "We will not grant Barak's government an achievement."

Shochat decided, nevertheless, to put the reforms to the vote, as he had, at that time, managed to garner support from all other factions in the Knesset. But at the last moment, Shas tried squeezing him on income tax debts; and when Shochat refused, Shas turned the vote into a no-confidence motion, so that every party on the right had to vote against - and the reforms fell. It was all entirely political - no problems of "implementation."

The State of Israel continues to pay the price today, as taxation on labor remains much too high, with all its negative implications on employment. Capital-owners continue to celebrate, with tax exemptions on their income from abroad; and there is no tax on capital in Israel, with all the negative implications on the distribution of income in the economy.

The Ben-Bassat Committee wrestled with the problem for six months. In the process, it turned to Bank Leumi, which checked how the recommendations could be implemented in practice. The bank found that taxation on capital was viable.

So let's assume that Finance Minister Shalom is against taxes on the stock exchange and that he would also like to introduce some amendments and updates. That's quite alright, perfectly legitimate. But the report itself is already at hand; all the calculations have been done; and thousands of hours have been invested, leaving only one thing left to do - to go to Income Tax Commissioner Tali Yaron-Eldar and ask her to insert the changes and implement the report efficiently and quickly.

But then there would be a little problem. There would be no new committee, launch parties or small leaks from the panel over many months that could harm the economy. And worst of all, someone could accuse Shalom of simply implementing the Ben-Bassat report; and just the thought of that sends shivers down the finance minister's spine.