After Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), on Monday evening, IT security company Check Point Software Technologies Ltd. (Nasdaq: CHKP) released its trapped profits and is paying NIS 500 million in taxes. This comes a few hours after Teva announced that it is releasing NIS 33 billion in trapped profits and will pay NIS 2 billion in taxes.
Check Point has NIS 1.7 billion in trapped profits. Three years ago, the Israel Tax Authority demanded that the company should pay NIS 1.4 billion in taxes on income of its Singapore subsidiary in 2002-05.
The Tax Authority's campaign to release trapped profits has generated NIS 4.3 billion in taxes, although the tax rate is only a few percent on the tens of billions of shekels in trapped profits released by the big companies. Earlier this week, Israel Chemicals Ltd. (TASE: ICL) announced that it was releasing all the NIS 3.8 billion in trapped profits of subsidiaries Dead Sea Works and Rotem Amfert Negev and that it will pay a tax rate of 10% on them - NIS 380 million. Trapped profits are profits from activities that attracted tax benefits under the Law for the Encouragement of Capital Investment and that cannot be distributed without incurring further tax.
Minister of Finance Yair Lapid has welcomed the tax revenues from the corporations. "We've returned some of the people's money to them," he said in an interview with “IDF Radio" (Galei Zahal) this morning.
Lapid added that the Law for the Encouragement of Capital Investment, under which the huge corporations received large tax breaks, needed to be improved, but he also reiterated his position that tax breaks should continue in order to attract investment to Israel. "When the Law for the Encouragement of Capital Investment was enacted, I was not in politics. If it were up to me, things would have been done differently, but you should remember that these companies are not enemies of the state. Teva employs many workers and Check Point is the spearhead of our economy. One of the ways to bring them is tax breaks," he said.
Lapid mentioned the extra tax revenues, but did not promise to immediately ease the tax burden on the middle class. "We still have a deficit. We entered office with a deficit of NIS 35 billion, we've taken tough measures and people were terribly angry at us, justifiably. People said, 'Why did we elect Lapid? To raise taxes?' First of all, we had to plug the deficit. We stopped the hemorrhaging. I've promised 700 times that within 18 months, the situation will improve. What we see now is the start of the improvement. Yesterday, you received proof that I am not working for the big companies or the tycoons, but for the middle class."
Published by Globes [online], Israel business news - www.globes-online.com - on November 12, 2013
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