"It's insane. I calculate that if the government were to invest the NIS 11.8 billion that it has invested in the form of tax breaks for Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) since 2006 in small businesses, it could have saved 34,000 businesses and created 40,000 jobs. This would be instead of the 3,500 jobs created by Teva in exchange for the huge aid it received from the government," Israel Association of Crafts and Industries president Yehuda Alhadeff told "Globes" on Wednesday, in response to the tax breaks given to corporations in 2006-11 under the Law for the Encouragement of Capital Investment.
"In the end, everything is personal. Government officials sitting across from the CEOs of big companies, like Teva and Intel, think about the future of their jobs in 3-4 years, and distribute the public's money without the thought or criteria which prevail in Europe," said Alhadeff. "The top civil servants who face the corporations' executives quake in fear and will not say no. The numbers are inconceivable."
Alhadeff called the NIS 17 billion in corporate tax breaks since 2007, "a huge scandal which should be investigated and reach the unequivocal conclusion about government policy toward 99% of the country's businesses. It's unacceptable that more than 90% of tax breaks go to the top 10% of companies, while small and mid-sized business, which are being strangled by severe credit shortages, are forced to be satisfied with crumbs."
The Association of Crafts and Industries says that Israel has 400,000 small businesses, most of which provide manufacturing services to big manufacturers as subcontractors. "The components of the most sensitive Elbit Systems' (Nasdaq: ESLT; TASE: ESLT) optical systems are manufactured by us at lathe shops and small enterprises. The claim that the corporations are exporters and we are not is simply wrong," said Alhadeff.
"The small business sector is responsible for 35-40% of Israel's industrial output, but we get only crumbs from the government. Only 3,600 of Israel's 400,000 small and mid-sized business received aid from the government fund for small businesses - just 0.8% of all small and mid-sized business. Only half of the businesses which applied for a loan received one.
"There is a reason why such a tiny fraction of enterprises applied to the government fund: it's the fund's high interest rate and its demands for guarantees and collateral, which most enterprises do not have. This happens when unremitting billions flow to the big corporations. Because of these impossible conditions, small enterprises prefer turning to the banks, because they offer better terms."
The Association of Crafts and Industries calls on Minister of Finance Yair Lapid to review both the Ministry of Finance's policy on the Law for the Encourage of Capital Investment and aid for small businesses. "Small and mid-sized enterprises lack a strong lobby and networks. Not only do they not benefit from capital, every year they are hit with new measures that harm their earning power," said Alhadeff.
Published by Globes [online], Israel business news - www.globes-online.com - on July 18, 2013
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