Minister of Finance Yuval Steinitz today expressed the hope that government would be able to close 2012 with a deficit of 3% of GDP, a day after the Ministry of Finance reported that the deficit had exceeded 4% of GDP in the 12 months through August. He told the Knesset Finance Committee, which is discussing the issue of corporations' trapped profits, that it was not possible to collect all the money from the corporations, but that an effort to collect some of it should be made.
"We are making an effort, and hope that the 2012 deficit will be around 3% of GDP," Steinitz said. "There is a shortfall in state revenues, especially ahead of 2013. That is why, a month ago, I submitted a package that will help us met the deficit targets. The trapped profits bill is needed even more now as an alternative to tax hikes, because it is a calculated measure and alternative to tax hikes for the State of Israel. In any event, the moment we learned about the trapped profits, I thought that we should do something to collect taxes from these companies which we had not previously collected."
Steinitz rejected criticism that the Ministry of Finance's flexibility and willingness to collect fewer taxes from large corporations was due to pressure. "I read in the paper that this bill is the result of pressure. I shall make it clear: no company has approached me. I heard about the trapped dividends for the first time at the Ministry of Finance. It's impossible to collect this money, and I decided that we should try to collect some of it."
Under the old Law for the Encouragement of Capital Investments, Israel grants extensive tax breaks to large companies, which may not send profits out of the country, trapping them here. The new bill aims to allow these companies to send the profits, estimated at NIS 100 billion, out of the country, in exchange for paying a lower tax rate on them.
Published by Globes [online], Israel business news - www.globes-online.com - on September 6, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012