Tax reformer Rabinowitz: No country has solved problem of fully taxing the rich - TheStreet

No country in the world has found a way to make the seriously rich shoulder their full share of the tax burden, tax reformer Yair Rabinowitz told TheMarker. They always find legal structures resulting in very low tax bills.

The Rabinowitz Committee was appointed by the finance minister to recommend reforms in Israel's income tax system. The Rabinowitz panel follows an earlier panel led by the former director-general of the Finance Ministry, Avi Ben-Bassat, whose recommendations were rejected by the incumbent finance minister.

The Rabinowitz committee's targets include taxation of Israelis living abroad, which touches on the issue of levying tax from the super-rich. Most wealthy Israelis take advantage of foreign tax havens and other mechanisms to avoid inclusion in the uppermost echelon of taxpayers.

Two other key issues the panel is addressing are taxing capital market gains, and reducing tax on labor.

The panel is expected to recommend a 15% tax on stock market gains, with a higher 25% rate of tax on annual gains exceeding NIS 1 million. But, Rabinowitz insists, no major decisions have been made yet.

Regarding tax on labor, Rabinowitz opposes the government proposal to increase it. If anything he supports reducing the tax burden. He also opposes increasing national health and insurance payments.

Ultimately, he says, increasing the tax burden could lead to more evasion, without the state gaining any increase in tax revenue.

The Rabinowitz panel is due to submit its tax reform proposals to the government by month-end.

Although tax reform previous panels have found their recommendations ignored by government, Rabinowitz believes his will be accepted. "This is the first time that the finance minister has said he will accept the (panel's) conclusions even before they are made public," he pointed out. He believes the reform will kick in during early 2003.