"I believe the tax reform has a Knesset majority and can garner 70 votes," committee member CPA Avi Alter told TheMarker. "We tried to create a viable reform."
The Rabinovitch Committee avoided taxing areas known to be problematic and capable of causing the downfall of the entire reform proposition. The committee did not recommend any taxes on provident funds or pension funds and no tax up to a pre-set ceiling on advanced training funds. The committee did not recommend taxation of gifts, cashed in vacation pay, or severance pay and did not intervene in collective bargaining agreements with the Histadrut Labor Federation. "We decided to leave that for the government to handle," Alter said.
Alter estimates that one of the problems the reform could encounter is enforcing international taxation ¿ in other words how to collect tax in practice on Israel's overseas income. "15% is not a high tax so there will be no interest in creating black money," Alter said. "We didn't want to cause shock waves and it appears the effect of the tax will be marginal."
Alter noted the estimated cost of the reform in 2008 of NIS 10.2 billion but there is an expectation that economic growth will increase tax revenues and offset a large portion of that cost. "That is of course dependant on the security situation," Alter added.
According to him, Attorney General Elyakim Rubinstein's opinion that future profits from assets acquired May 8, 2000 (the date of new tax policies), will not withstand examination by the High Court of Justice and will meet widespread opposition. According to him, that opposition will prevent taxation of assets created prior to that date.
Alter estimates that taxation of shekel instruments and a decrease in the tax rate on foreign currency instruments will not weaken the shekel, as the tax rates are low.