Businessman Meir Zeiler convinced Knesset members to support him by approving a personal tax exemption in Israel for his overseas business as part of the income tax reform.
MK Michael Kleiner (Herut), a member of the Knesset Finance Committee, told "Globes" that Zeiler had contacted the committee members and told them he would have to pay taxes if the reform passed in its current form. Kleiner said that the committee members had asked Income Tax Commissioner Adv. Tali Yaron-Aldar and Rabinovitch committee chairman Yair Rabinovitch, who persuaded them to insert the amendment into the reform.
Kleiner added, "The amendment is justified, because a matter of principle is involved. Without the exemption, Zeiler would have closed his plant in Israel (Zeiler has a fabric plant in Kiryat Malachi - "Globes"). 100 employees would have been sent home. It's insane that a tourist investing in Israel and setting up a plant should have to pay taxes on his overseas business.
"The amendment is formulated in general terms. Others may benefit from it now or in the future. Even if the amendment is for only one person, however, it's still justified."
Section 76 of the tax reform bill states, "An individual who became a resident of Israel, and is the controlling shareholder and manager of an approved enterprise, will be exempt in 2003-2006 from taxes on income from interest, dividends, and rent, if that income was not from the business, and is derived from overseas assets that he owned before becoming a resident of Israel, or from other assets that replaced such assets and to which he retained ownership after he became a resident of Israel. He will also be exempt from capital gains from the sale of such assets, unless he wishes otherwise with respect to said income, either in whole or in part."
For Zeiler, and as far as is known, for him only, this means he is fully exempt from taxes on his overseas business.
Rabinovitch said in response, "Section 76 of the law was added at the request of the Finance Committee, without support from either the Income Tax Commissioner or myself. Zeiler contacted me, but I wasn't convinced we should write a special section like this at his request. The Finance Committee and the Knesset have full authority to add sections; they don't need support from either the Rabinovitch committee members or the Income Tax Commissioner."
Rabinovitch noted that he had discussed the issue with various Knesset members, but they had not persuaded him that the amendment was necessary. "I gave the Knesset members my opinion just as I gave it to you. The proof is that no such section was ever in the Rabinovitch committee recommendations at any time," Rabinovitch asserted.
Yaron-Aldar said in response, "Knesset members bear sole responsibility for initiating the amendment. The Finance Committee is entitled to decide for itself. To the best of my knowledge, the amendment is not for the benefit of any specific person; it was designed to solve a particular situation."
Published by Globes [online] - www.globes.co.il - on July 25, 2002