Capitulating to widespread pressure, the Israeli government is planning to cancel a controversial capital gains tax.
Finance Minister Avraham Shohat told reporters here Monday that at next week’s Cabinet meeting he would recommend repealing the controversial tax, which was passed late last year and took effect on Jan. 1.
If the Cabinet approves Shohat’s recommendation, as it is expected to do, legislation will then be prepared to repeal the tax.
Shohat said his decision came in the wake of “political and public pressure” to cancel the tax and did not reflect a change in his own thinking.
“I still believe a tax on stock profits is the right and just thing”, he said.
Shohat had waged a personal political battle for passage of the tax, but he said he had no plans to resign in the wake of the controversy.
As for the projected $167 million in state revenue the tax had been expected to generate, Shohat said the gap would have to be made up in some other way.
Prime Minister Yitzhak Rabin, who had waffled on the tax before its passage, said Monday he accepted Shohat’s decision to repeal the tax altogether. He added that his faith in the finance minister had not wavered.
The tax had been a source of controversy within the Labor Party prior to its implementation, with some government ministers and Knesset members fearing it would erode already waning support for the party.
On Monday, some of Shohat’s Labour colleagues welcomed the move. Trade Minister Michael Harish called for a coordinated effort of ministries to ensure continued growth of the economy.
Meanwhile, opposition leader Benjamin Netanyahu of Likud said the government should never have passed such a tax.
The latest events only highlight that the “government is confused and can’t make policy decisions”, Netanyahu said, adding that best thing for the Rabin government to do at this point is to step down.
The Tel Aviv stock exchange closed before the announcement was made.
But in New York, share prices of Israeli companies surged following the news.
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