The Bank of Israel is not stopping with purchases of dollars in its effort to stem the appreciation of the shekel. Sources inform ''Globes'' that it has asked the Ministry of Finance to equalize the tax rate paid by Israeli and foreign investors on Shahar unlinked shekel government bonds and on financial derivatives.
Currently, Israelis pay a 15% tax on capital gains on investments in Shahar bonds and 25% on gains on derivatives. Foreign investors pay less. By equalizing the tax rates between Israeli and foreign investors, the Bank of Israel wants to indirectly affect the foreign currency market.
The sources say that the Ministry of Finance opposes the Bank of Israel's proposal, on the grounds that the ministry uses Shahar bonds to raise capital. The ministry fears that taxing the capital gains on the bonds will make it more difficult for the government to raise capital overseas. Given the need to deal with the huge deficit, the ministry does not want to do anything that might affect its ability to raise capital.
The Ministry of Finance also argues that it is not worthwhile changing the taxes in accordance with currency movements. A ministry source cynically told "Globes", "What would happen, if the shekel sharply depreciates tomorrow or the day after? We'll lower the tax rate again?"
Published by Globes [online], Israel business news - www.globes-online.com - on May 9, 2013
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