Steinitz plans tax breaks for cos "trapped capital"

Finance C'ttee approves NIS 300m coalition funds distribution

A top Finance Ministry official who supports the tax break said, "NIS 15 billion in the hand is better than NIS 100 billion in the bush."

Sources inform ''Globes'' that Minister of Finance Yuval Steinitz is trying to arrange a tax break for global companies with trapped capital in Israel. At a meeting today, top Israel Tax Authority officials presented a policy document, which includes data, analyses of similar cases in other countries, and various options. No decisions were taken at what had earlier been called the deciding meeting on the subject.

Steinitz's office said, "The minister has not yet made a decision. He asked for more information, and will continue to study the issue."

A source at the meeting told "Globes", "The minister could have made a decision today, but he wanted to think and get more information, study it further, and that is good."

Sources at the Ministry of Finance believe that Steinitz has already decided that the tax breaks are necessary, and he is now trying to find a way to make them palatable to the public by dragging out time. The sources add that time is working in Steinitz's favor, and that a decision should be included in the 2013 economic arrangements bill and presented as a life preserver for the economy. The sources believe that if he can persuade the public and Prime Minister Benjamin Netanyahu that the tax breaks are an alternative to tax hikes, he will get the tax breaks passed.

In a few days, Steinitz is due to meet Netanyahu, who has appointed himself as super-minister of economic strategy who intervenes in every major decision, in order to persuade Netanyahu on the tax breaks for the companies. As far as Steinitz is concerned, the tax breaks on the trapped capital will generate assured revenues, which will help reduce the burgeoning budget blowout. He also believes that tax breaks will encourage business by multinationals in Israel.

Steinitz hopes that the tax break on multinationals' trapped capital will generate an immediate NIS 15 billion in revenues, which would plug most of the spending overruns in 2012. The gap between the permitted budget deficit and the projected deficit is currently estimated at NIS 14 billion. After today's meeting, a top Ministry of Finance official who supports the tax break said, "NIS 15 billion in the hand is better than NIS 100 billion in the bush."

Steinitz has declared 2012 as the year of investment in the economy, and he sees the 35% increase in investment since he took up office three years ago as one of his singular achievements.