The tax reform committee headed by CPA Yair Rabinovitch submitted its proposals a month ago, with a huge media splash. The Finance Ministry immediately tackled the job of pushing the document through government and parliament, where it indeed passed its first of three votes.
So what were the committee members doing, for eight hours straight, at Rabinovitch's office on Sunday?
Good question, simple answer. The committee did submit its proposal, but it turned out to be full of holes and loopholes. Before the press conference announcing its submission had ended, it became apparent that changes were needed.
Thus the Knesset members were astonished to be presented with an amended version of the Rabinovitch reform containing over a hundred corrections, additions, and deletions, at the height of their debate on the reform.
Suddenly it became apparent that the Rabinovitch panel, which had ostensibly wrapped up its deliberations a month before, was continuing to meet at Rabinovitch's office at the very same time that the Knesset's Finance Committee was convening to discuss the fruit of the panel's labors.
If it contained so many unresolved issues, why had the panel's proposal been pushed through with such urgency? So Finance Minister Silvan Shalom could convene a press conference as quickly as possible, of course, to broadcast a reform signed and stamped by himself. All the panel had been supposed to do was take the tax reform proposal compiled by former treasury director-general Avi Ben-Bassat, modify it here and there, change the name to Rabinovitch and attribute it to Finance Minister Silvan Shalom.
But the fact that the panel continued to meet and fine-tune its document a month after submitting it to parliament begs questions beyond its working methods and beyond the PR machinations of the finance minister.
The real issue at stake is: are the Rabinovitch panel members, especially Rabinovitch himself, turning into an "advisory council" to the treasury's income tax department? A permanent commission whose mandate is to interpret and fine-tune the tax laws?
Questions about predisposition
The composition of the Rabinovitch panel had been questionable from day one. The Ben-Bassat committee, its predecessor, had been headed by a person whose objectivity and lack of bias were unquestionable. But Rabinovitch is riddled with conflicts of interest, by virtue of his being a tax consultant and tax planner for any number of corporations and businesspeople. His whole
has been to find loopholes in the income tax law.
The previous panel had been led by Professor Ben-Bassat, one of Israel's most prominent economists. It had contained mostly unbiased professionals. But eight of Shalom's 13-man panel are tax consultants, double their proportion in the Ben-Bassat panel. It is unsurprising that taxpayers and accountants alike wonder whether the Rabinovitch proposals are tailored less to the needs of the Israeli company, and more to the needs of the wealthiest customers of Rabinovitch and his colleagues.
The excuse for appointing Rabinovitch was create a panel whose recommendations would be "feasible", while the previous panel was accused of offering a reform that was too perfectionist, and could not be pushed through parliament.
Nonsense. First of all, the Finance Ministry didn't need to establish a new panel just to circumvent the political obstacles, high as they were: all it had to do was amend the Ben-Bassat recommendations.
Secondly, since the Rabinovitch panel tabled its findings, it has become obvious that the how and when of many key recommendations is far from clear. All that talk about Rabinovitch and his legal and accounting colleagues being practical people who'd come up with practical solutions turned out to be purely theoretical.
The Ben-Bassat panel was also beset by technical difficulties, but the Rabinovitch panel suffers from a more fundamental flaw: like its founder, Finance Minister Silvan Shalom, it based its ideas on over-optimistic growth forecasts. If the forecasts turn out to be wrong, the tax cuts on labor that the panel calls for cannot be made. And cutting tax on work is the core of the reform.
The situation in which tax regimes and their interpretation are abandoned to the mercies of lawyers and accountants, who wear the hat of statesmen in the morning and advise their clients how to evade taxes in the afternoon, was pointless to begin with. For the panel to keep meeting after tendering its recommendations will gut the tax system, and its legitimacy in the eyes of the taxpayers.
The Rabinovitch panel submitted its conclusions a month ago. It is time to thank accountant and tax consultant Yair Rabinovitch, and the other people on his panel who represent the fattest cats in Israel, for their contribution to the nation, and leave the job of plugging the loopholes and correcting the ills to the good officers of the Income Tax Authority.