"It could certainly be that in the current situation, with the economy in fiscal deficit, tax rates on large companies under the Law for the Encouragement of Capital Investment should be raised. This has already started to be done in the state budget. At the same time, we have to very careful not to go to extremes, and not to throw out the baby with the bathwater," Yehuda Nasradishi CPA, who headed the Tax Authority in the period 2007-2011, told "Globes" today, in response to figures published by the Ministry of Finance and the Tax Authority on the huge tax benefits awarded to public companies, headed by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), in that period. This followed the petition to the court by "Globes" to order the release of the figures.
Nasradishi welcomes the Ministry of Finance's intention of re-examining the tax benefits question, and more than hints that if Minister of Finance Yair Lapid should set up a professional body to conduct a review, he would not object to taking part. "In my view, what should happen now is that a group of professionals should put their minds to it and examine the tax benefits issue. If I'm approached to participate in such a body, I'll consider it. It's important to remember that the approvals to the companies were given as contractual undertakings, and the review body will have to examine whether it's possible to terminate approvals given as contractual undertakings in the past."
The tax benefits were mostly given during the time that you headed the Tax Authority. With hindsight, do you understand the public criticism that these were excessive and discriminatory tax breaks given to the most powerful corporations, while small and medium-size business groan under a credit squeeze, and have to pay full tax rates?
"In the economic situation that prevailed here in recent years, the distribution track of these benefits under the Law for the Encouragement of Capital Investment was a good track. When you examine the matter, you mustn't forget that these companies employ, directly or indirectly, thousands of workers. All the direct tax might not have been collected from them, but you have to remember to check how much tax was deducted from the workers, the whole tax picture. You can't just look at one angle, and the committee that is set up will also have to examine the whole tax picture. The companies that received the tax benefits received them lawfully."
Confidentiality for private companies
Tel Aviv District Court judge Dr. Michal Agmon-Gonen ruled that Ministry of Finance and the Tax Authority must also publish the names of the private companies that received the highest benefits under the Law for the Encouragement of Capital Investment in the years 2006 -2012, but the ministry and the Tax Authority have decided to appeal against the decision to the Supreme Court. What are they so afraid of?
"I think that the Tax Authority was obliged to appeal against the ruling, and that privilege for the tax benefits given to private companies must not be removed. If the Tax Authority were to reveal the information to a newspaper, however respectable, it will not receive the information from the companies in the future and will not be able to use it. This information is a working tool for the Authority.
"The Tax Authority has substantial amounts of information in all areas, including income and expenditures, and it's not for nothing that this information is strongly protected by privilege. Exposure of the information on the benefits the private companies received will cause great damage to the Tax Authority in its day-to-day operations. Information about a company's tax benefits tells us about its income and turnover and professional secrets. It must therefore not be disclosed, and the courts have held many hearings on these matters. Exposure of the information about the public companies is a different matter, because these are transparent companies that release financial statements every quarter, they have boards of directors and reports that they must issue and so forth."
A highly respected District Court judge handed down a long, closely argued and comprehensive ruling that, even in the case of private companies, the public's right to know takes precedence over the interests at the basis of the imposition of privilege on the information.
"Far be it from me, as a citizen and also as a former director of the Tax Authority, to criticize court rulings. But in the State of Israel there is a right of appeal, and the right to argue that it is neither right nor desirable that the Tax Authority should reveal this information, which is provided to it alone, and which it guards and protects with the best means of protection available."
Published by Globes [online], Israel business news - www.globes-online.com - on July 17, 2013
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