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Cablegate: Histadrut Threatens National Strike Over Repeal Of

VZCZCXYZ0010
RR RUEHWEB

DE RUEHTV #1322/01 1711423
ZNR UUUUU ZZH
R 191423Z JUN 08
FM AMEMBASSY TEL AVIV
TO SECSTATE WASHDC 7222

UNCLAS TEL AVIV 001322

SIPDIS

E.O. 12958: N/A
TAGS: ELAB IS
SUBJECT: HISTADRUT THREATENS NATIONAL STRIKE OVER REPEAL OF
TAX EXEMPTION


1. Summary: The Israel national labor federation Histadrut
has threatened a national strike to begin on June 30 if
Finance Minister Ronnie Bar-On does not rescind his proposal
to cut tax exemptions for long-term savings plans for
training programs. Previous finance ministers have attempted
to remove the exemption, but backed down in the face of labor
and government opposition. The media has quoted opposition
critics as calling the Bar-On proposal "election economics."
Histadrut head Ofer Eini criticized the Ministry of Finance
(MOF) plan to remove the tax exemption while at the same time
reducing income taxes for individuals and companies.
Histadrut contacts are divided as to the likelihood of a
strike, but agree that if Bar-On stands firm on removing the
exemption, there will be a national strike starting June 30.
End Summary.

2. The Israel national labor federation Histadrut has
threatened a national strike to begin on June 30 if Finance
Minster Ronnie Bar-On does not rescind his proposal to
abolish tax exemptions on long-term savings plans for
vocational training programs. The move was announced along
with tax cuts for businesses and individuals that would be
phased in over a seven-year period beginning in 2009. The
income tax exemption, which is available to the private
sector as well as the public sector, allows employers to
contribute up to 7.5 per cent of an employee's income and the
employee to contribute up to 2.5 percent of their income -
tax free for both contributions - into a fund that was
designed for training costs but in now often used for home
improvement, vacations, and the like. The media reported
that opposition Knesset members accused the Finance Minister
of "election economics," a reference to rampant speculation
on a possible dissolution of the government and new
elections. Meretz leader Haim Oron, one of the most
respected and knowledgeable figures in the Knesset on
financial matters, was quoted as saying that Bar-On was
"making sure that the haves have more and the have-nots have
even less," a complaint echoed by Labor MK Shelly Yachimovich
who reportedly said that Bar-On's decision would deepen the
gaps between rich and poor. Bar-On was quoted as calling the
new policies "the opposite of election economics" and in the
past has railed against "irresponsible" and "populist"
legislation.

3. This is not the first time that MOF has attempted to
remove the tax exemption. Benjamin Netanyahu was one of the
previous finance ministers to try, and, like all others,
failed in the face of strong opposition. One contact
theorized that the tax exemptions actually benefit a number
of high rollers more than the rank and file union members,
and that these private sector individuals are more important
targets to the MOF than blue collar participants in the
program. But the blue collar participants bring organized
labor into the fight, and to date no Finance Minister has
been able to overcome that roadblock.

4. Contacts at Histadrut were divided over the likelihood of
a strike. One contact called the conflict more a case of
"muscle flexing" than anything else, and said it would be in
nobody's interests to have a national strike now with all the
political turmoil (surrounding Prime Minister Olmert and
possible elections). He noted that previous finance
ministers have threatened to remove the tax exemption but had
always backed down, and that while current Finance Minister
is a "tough nut", in this case he is "barking up the wrong
tree." When contacted again a few days later, following
continuing media reports on a looming walkout, the Histadrut
insider maintained that a full blown national strike was
still doubtful. According to him, Shraga Brosh, head of the
manufacturer's association, is against Bar-On's move, and so
are most of the GOI ministers. (Brosh has reportedly formed
a close association with Eini and often backs him.) The
contact maintains that while Brosh and the ministers think
the removal of the exemption is a step in the right
tax-reform direction, they think it is not worth the trouble
it would bring at this time, especially as Bar-On went about
it without prior union consultation. Another Histadrut
contact, however, called a national strike likely, and said
it would be carried out on June 30th unless Bar-On withdraws
his suggestion to abolish the tax exemptions. This contact
noted that there are no negotiations at present between the
MOF and Histadrut.

5. Comment: The media is hyping the possibility of a strike.
The June 17 edition of the Jerusalem Post highlighted Eini's
announcement that day approving a decision to hold a general
strike on June 30. Eini was also quoted as saying that he
instructed Histadrut to begin preparations for the strike by
the beginning of the following week. Strike "preparations"
are common in Israel, however. The big question is whether
Bar-On will stick to his guns or not. Both Histadrut
contacts agreed that if Bar-On bucks history and stays the
course on his proposed reforms, there will be a national

strike. Given historical precedence, it seems likely that
Bar-On will yield, or at least that some accommodation will
be reached. If Bar-On stands firm, however, the ball will be
in Histadrut's court. National strikes in Israel are
traditionally on big tickets items like jobs, salaries,
pensions and the like, and if push comes to shove it is not
entirely clear to all whether Histadrut really wants to go to
war and shut down the economy at this time over this
particular issue. End comment.

********************************************* ********************
Visit Embassy Tel Aviv's Classified Website:
http://www.state.sgov.gov/p/nea/telaviv

You can also access this site through the State Department's
Classified SIPRNET website.
********************************************* ********************
JONES

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