On Friday, the Prime Minister's Bureau refused to allow the Ministry of Finance to submit a proposal for an amendment on trapped profits for discussion at today's cabinet meeting. Prime Minister's Office director general Harel Locker told Ministry of Finance officials that their request arrived late and hastily put together.
Minister of Finance Yuval Steinitz's request for a cabinet discussion on amending the law relating to trapped profits arrived Wednesday evening, against the cabinet secretary's procedures which set a deadline of noon Wednesday for submitting subjects for the upcoming cabinet meeting, except in especially urgent cases.
Locker also told the Ministry of Finance officials that Prime Minister Benjamin Netanyahu refuses, and will refuse, to raise such an important issue for cabinet discussion before he personally holds in-depth discussions on it. A top government source told "Globes" today that the critical question was whether such a proposal was right for the nation in general, or whether it only benefited a minority. If that is the case, it would be very hard to accept it.
The Prime Minister's Bureau refused today to comment on the matter, saying that it does not comment on matters relating to internal discussions.
The Ministry of Finance said in response, "The finance minister decided not to submit the issue of trapped profits to the cabinet at this time. The issue will be submitted for discussion in the coming weeks."
In the middle of last week, Steinitz received a position paper written by Deputy Attorney General Avi Licht on the issue of an amendment to the law with regard to trapped profits. He listed a series of legal flaws about the decision, and especially how it was made by Steinitz and Israel Tax Authority director general Doron Arbeli. Licht listed several legal steps which could be taken to correct these flaws, which would allow Steinitz, if he wants, to continue to push the idea. Steinitz's proposal on trapped profits has drawn harsh criticism from across the political and social spectrum.
Licht did not say that he could not defend Steinitz's decision before the High Court of Justice. However, the Ministry of Finance and Ministry of Justice are increasingly worried that if the amendment is passed, and Labor Party chairwoman MK Shelly Yachimovich, MK Zehava Gal-On (Meretz), and organizations such as Ometz - Citizens for Proper Administration and Social and Judicial Justice petition the court against it, the state would be hard-pressed to defend the decision, if only because of its appearance of inequality.
After receiving Licht's letter, the Ministry of Finance asked the cabinet secretary to schedule a cabinet meeting on the trapped profits on Sunday, with the intention of making the necessary corrections later. Locker told the ministry officials that this was an important matter of the broadest socioeconomic significance, which came up at a time of public demands for social equality. He said that Netanyahu would not allow a cabinet discussion on the matter in the future until after he and the Prime Minister's Bureau held in-depth discussions by all the relevant parties and a decision is made.
A top government source told "Globes" today, "The Ministry of Finance's conduct on the issue of trapped profits is astonishing at every level. The ministry has been discussing the matter for weeks, but oddly and in panic, only remembered to rush to the cabinet secretary on Wednesday night, fully aware that that the legal deadline had passed for submitting issues for discussion by the cabinet.
"They also know, or should know, that the issue of the trapped profits and their consequences are extremely serious, and that the Ministry of Finance chiefs, with all due respect, cannot discuss the matter only between themselves. This is a matter of principle, and the Ministry of Finance knows that it must discuss it with the prime minister, but they wanted to rush to the cabinet. Moreover, what exactly does the Ministry of Finance want the cabinet to discuss? At first they talked about NIS 20 billion in tax revenues, then NIS 12 billion, then 8 and then 5. They are now saying half of that. This is evidence of amateurishness and maybe an inability to make a thought-out decision."
A decision on the NIS 120 billion in trapped profits may now end up in court, which is already in the midst of discussions on the case.
It is possible that Netanyahu's objections to tax breaks on trapped profits, or Steinitz's decision not to submit it to the cabinet for a discussion today (according to the Ministry of Finance), are tactical measures. Netanyahu has to decide whether to hold elections on schedule, or bring them forward to the end of this year, which means he will not have to submit a budget for 2013. If he calls early elections, he prefers doing so without being identified with a decision that appears inequitable and unjust. However, when the cabinet discusses, if it discusses, the harsh budget cuts and tax hikes in the 2013 budget, Netanyahu will then end his objections about the trapped profits and present them as a positive issue that will help the public that is about to be hit by budget cuts and tax hikes.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2012
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