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Netanyahu, Meridor at Odds over Capital Market Reforms

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The rift between Prime Minister Benjamin Netanyahu and Finance Minister Dan Meridor deepened this week with the Cabinet’s partial adoption of a Finance Ministry capital market reform package.

After a marathon session that ended in the pre-dawn hours Monday, the Cabinet decided to sidestep a politically unpopular move and reject Meridor’s proposal for a tax on short-term savings.

The short-term savings tax was a key component of the reform package.

Proponents of the move, including Meridor, said the tax was needed to encourage long-term savings and boost the stock and bond markets.

For opponents, the tax was a political land mine.

Netanyahu, who promised not to raise taxes during his election campaign, was against the short-term savings tax.

During the Cabinet session, he refused to back Meridor, who had wanted the reform package adopted in full.

The reforms, drawn up by a Finance Ministry commission, included a call for a tax on savings plans of less than 10 years.

It also included various tax breaks on long-term bond investments.

Proponents of the reforms said that without their full adoption, the government would be unable to stimulate Israel’s capital markets.

During the Cabinet session, an agreement was reached to form a ministerial committee to review the short-term savings tax.

The committee was given two weeks to complete its work. In the meantime, no steps were to be taken regarding any of the proposed reforms.

Netanyahu and Meridor have had other disagreements on major financial issues.

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