Israeli officials put the tax squeeze on Teva

Teva Pharmaceutical Industries ($TEVA) may be facing a bigger bill from the tax man on its home turf. The company didn't make any friends in Israel when local media reported tiny tax rates paid by the company. Coming as they did amid news of cost-cutting and layoffs, the tax figures stung--and sparked a public outcry, Haaretz notes. And now, Israeli Finance Minister Yair Lapid is in talks with Teva chief Jeremy Levin to work out a settlement.

According to Israeli media, the company paid $71 million in 2011 taxes in Israel, or just 3.5% of its earnings. In 2012, its rate was even lower--0.3%, Haaretz says, or $5 million in payments. Teva itself has said its tax payments are much higher.

Corporate tax relief is by government design; the country wants to encourage development in Israel, so it has given Teva tax benefits for investing in the country. In its 2012 annual report, Teva cited $15.1 billion in so-called "trapped profits" exempt from taxation, Haaretz says. The company said if it had paid dividends on those profits, it would have had to pay $2.13 billion in taxes. Instead, it re-invested the money in Israel and escaped the taxes.

Now, however, the Israeli government has implemented some austerity measures--and Lapid has said corporate tax benefits are hurting individual citizens. "It is time to change the rules of the game on non-taxable income of international companies and on tax benefits," Lapid told Levin in a meeting Friday, the Jerusalem Post reports.

Teva's CFO said at a conference earlier today that the company is weighing Israel's new taxation moves. "We'll have to examine the new tax environment," Eyal Desheh said (as quoted by Globes). "Israel is a priority, and over the years we've moved as much activity here as possible, partly because of the tax breaks. I hope we can continue to do this."

- see the Jerusalem Post story
- get more from Haaretz
- read the Globes article