Former tax commissioner irked by time wasted on new tax reform c'tee

Former Income Tax Authority Commissioner Yoni Kaplan says that current recommendations to impose tax on capital gains are no different from recommendations made by last year's Ben-Bassat Commission.

Kaplan told TheMarker that the recommendations of the Rabinovich tax-reform committee to tax the capital market, as reported by the media, are very similar to the recommendations made by the Ben-Bassat Commission. Kaplan sees no justification for the Rabinovich committee, and the year wasted on repetitive recommendations. He said had the plans to impose tax on capital gains been implemented at the time, the budget deficit would not have been so big.

The Ben-Bassat Commission was headed by former Finance Ministry director general Avi Ben-Bassat and was appointed in 1999 to draft recommendations for wide-ranging tax reform. Broadly speaking, the commission recommended taxing withdrawals from provident funds (for uses other than pension), capital gains, stock market gains, and raising taxes for the rich. Finance Minister Silvan Shalom, who was in the opposition at the time that the commission presented its recommendations, abolished the whole reform.

Kaplan said that taxation is not a good thing but the country is now in a situation where there is no choice but to impose tax on the capital market which must be done at the same time as lowering tax on labor. Kaplan believes legislation reducing tax on labor, effective as of January 2004, must be ratified now, although it is not possible to implement earlier because of the situation.

The former commissioner said that there is no technical problem in imposing tax on the capital market immediately. He called such such a tax preferable over an indirect tax that will hurt the weaker segments of the population. Kaplan is not concerned about Israelis transferring money overseas because those who wanted to transfer money abroad have already done so. Kaplan said that there are taxes also overseas, which is why a system of personal tax is necessary.

"Raising the deficit target isn't the right measure, because with a high deficit, rating companies will change Israel's credit rating. As a result the state pay higher interest rates, and inflation could once again rear its ugly head." In fact, this will lead to a situation where the budgets for 2003 to 2005 will be entangled in paying off debt, which is tax that falls on future generations, Kaplan warned.