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. 
 
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