Prime Minister Benjamin Netanyahu has asked Ministry of Finance budget director Amir Levy to examine not raising income tax for exporters based in the periphery to 9%, as planned under the new Law for the Encouragement of Capital Investment. The request was made following a request by former Minister of Finance Yuval Steinitz, who claimed that because of the government’s relatively strong financial situation, the new law’s planned tax hikes should be cancelled, and benefits should be granted to all export companies - in central Israel as well as in the periphery - whose profits have been hit by the weak dollar.
Due to the Ministry of Finance's opposition to the process, including Minister of Finance Yair Lapid, who only recently raised company tax rates for exporters that had previously enjoyed excessive discounts on this tax, Minister of Economy Naftali Bennett proposed cancelling the planned hike, from 7% to 9%, only for export companies in the periphery.
The Prime Minister agreed to Bennett’s proposed compromise, and turned to the Ministry of Finance to look into the matter. At the same time, Netanyahu reiterated his dissatisfaction regarding the planned rise of 1.5% in company tax, to 26.5%, that will go into effect on Wednesday. However, cancellation of the company tax hike is currently not on the agenda.
Cancelling the rise in income tax for all companies would cost the economy an additional NIS 900 million, while in recent weeks, tax hikes totaling NIS 3.8 billion were cancelled (NIS 3.3 billion in income tax, and NIS 500,000 on payroll tax).
Despite Netanyahu’s request, senior officials in Jerusalem admitted today that the chances of the process advancing are low, as 2014 begins in two days, and there is no way to enact a retroactive change in taxation. The Ministry of Finance stated that there is no concrete process in place, and the issues were mentioned “in the course of routine discussions,” and no additional changes to income taxes are expected. Moreover, the Ministry of Finance stated that if the goal is to ease pressure on the business sector, the way to do achieve this is through payroll tax, for which the tax hike has already been reduced from 7% to 6.75%.
Published by Globes [online], Israel business news - www.globes-online.com - on December 30, 2013
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