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Speculation on Capital Gains Tax Leads to Fluctuations in Stock Market

December 14, 1994
See Original Daily Bulletin From This Date

Finance Minister Avraham Shohat has quashed speculation that the Israeli government might back away from implementing the recently enacted capital gains tax.

The Tel Aviv stock market has fluctuated recently in response to rumors that Prime Minister Yitzhak Rabin would shelve the controversial 10 percent tax on Israeli investors that was enacted in November.

At a stormy Labor Party caucus meeting on Monday, Shohat lashed out at party members opposed to the tax. He dismissed the rumors that Rabin was considering abolishing or delaying the tax and said it would take effect as planned.

One of the critics of the tax, Economics Minister Shimon Shetreet, said it would have a detrimental effect on the stock market and would erode public confidence in the economy.

“The drafting of the tax has caused some con fusion and loss of confidence in the economy and capital markets,” he said. Because “we have not fully resolved the issue of taxing foreign investors, they are showing great hesitation in going into our market,” he told Israel Radio.

Aharon Fogel, director-general of the Finance Ministry, disagreed, saying there was no connection between the tax and recent market fluctuations.

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