1. Economic contempt, self-righteous arrogance, and emotional blackmail this is the customary way of silencing those who argue that large corporations and celebrated businesspeople who pay negligible income tax are abusing the state and its citizens. "Carry on like that and they'll leave here", "There'll be mass unemployment", "The periphery of the country will die", "Our entire advanced, smart economy will flee overseas"' "They'll snatch them up there", "They are doing us a Zionist favor by agreeing to be here". "They" are the big corporations and businesspeople.
2. "The rate of tax paid by the top 1% of the companies enjoying tax benefits in Israel was just 2.9% in 2009, on revenue totaling NIS 2.8 billion, and just 3.3% in 2010 on revenue totaling NIS 4.8 billion." Thus an embarrassed Deputy Minister of Finance Yitzhak Cohen was forced to report last July from the Knesset podium. Was this the result that the Law for the Encouragement of Capital Investment was intended to bring about? Was this cynical exploitation what successive governments had in mind, as they rushed to enact generous grant laws, far-reaching tax breaks, accelerated depreciation rates, this track and that track, and special taxation legislation?
3. It's not just that they laugh in our faces, make fools of everyone who doesn't understand what those in "the top 1% of companies enjoying tax benefits in Israel", their advisers, lobbyists, and the politicians that arrange things for them all understand, which is that this law, in its various guises, has failed. Studies published over years and State Comptroller's reports have revealed that the big money, the billions from the public purse, does not achieve the stated goals. In 2009, the Bank of Israel Research Division published a comprehensive paper on the effectiveness of the Law for the Encouragement of Capital Investment in the decade 1990-1999. The researchers found that the grants and tax breaks given in the framework of the law did not contribute to expanding investment and employment in the periphery, and did not lead to a narrowing of the gap in standard and living and pay in comparison with the center of the country. And after the utter, proven failure, and the billions thrown away here over decades, the law also caused severe irregularities, for example the downright failure of the Investment Center and the Ministry of Industry, Trade and Labor to collect billions of shekels owing because of failure to abide by conditions under which the money was paid out. Or for example the development of aggressive tax planning, at an exceptional level by international standards. It's not for nothing that the number of lawyers and accountants in Israel is among the highest in the world relative to the size of the population. The biggest problem here is a socio-economic one: anyone who pays tax as the law requires feels exploited, a sucker, and seeks any way possible to join in the cunning and deceit.
4. So we've had enough. Stop threatening. We're not in the 1950s any more, and we don't need favors. There's a community of workers, engineers, scientists, and high-technologists here of world standard that can sustain any business. So whoever wants to let them go. Whoever can find bargains overseas let them get on a plane. The point is that all over the world they understand the depth of cynicism in the tax benefits that a country grants for distorted reasons of one kind or another, for no return.
The general public has grasped that it is being exploited. It has grown worse since the current crisis began, exposing the nakedness of some of the world's giant corporations. In America, Europe, and in the Far East too, they understand by now that you can't continue laughing at everyone all the time and give preferential treatment to a few select people who will return the favor, sometime. The time has come for a new set of priorities. A new rule of life. Those who give, will receive. Those who don't, won't.
Published by Globes [online], Israel business news - www.globes-online.com - on February 13, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013