1 Israel's Cabinet voted Sunday to cancel an unpopular capital gains tax, in a move aimed at bolstering the sagging stock market and restoring confidence in the economy.
2 The tax on stock market profits, which was to go into effect Jan. 1 but had not been implemented, was cancelled by a vote of 13-2, said government secretary Shmuel Hollander.
3 Politically, the flip-flops have eroded Prime Minister Yitzhak Rabin's credibility at a crucial juncture in the peace process with the Arabs and at a time of declining popularity over continuing terrorism.
4 The tax was widely blamed for worsening a collapse of the Tel Aviv Stock Exchange, which lost about 40 percent of its value in the past year. Since reports last week that the tax would be cancelled, the market rose 12 percent.
5 On Sunday, however, the Mishtanim Index fell 3.6 percent, closing at 166.83.
6 Former Finance Minister Yitzhak Modai said the market's instability proved it was fundamentally unhealthy. 'It wasn't the tax that brought down the stock market, and its cancellation will not revive it,' Modai told Army Radio.
7 Hanna Pridan, an analyst for Bank Leumi, attributed the sluggish market to the past year's nearly 15 percent inflation rate, which, given the stability of the Israeli shekel against the dollar, has cut into exporters' profits.
8 Rabin agreed to the stock tax six months ago, arguing it would help fight inflation. Later, he backed away from that argument and implied he was misled by economists.
9 The initial proposal was for a 10 percent levy on profits from stock sales with no compensation for losses. After criticism that the scheme could have led to taxation on losses, the government proposed an alternative 20 percent tax on net profits only.
10 Two months ago, after reports he was planning to cancel the tax at the last minute, Rabin announced it would take effect as planned Jan. 1. But the tax was never collected, allegedly because of logistical difficulties.
11 'In the psychological, political and economic circumstances that were created there was no choice but to cancel it,' said Finance Minister Avraham Shohat after Sunday's Cabinet meeting.
12 The decision was criticized as surrender to Israel's economic elite at the expense of workers who continue to endure one of the industrialized world's highest taxation levels.
13 'Never has the government been so manipulated . by narrow business interests and populistic politicians,' wrote financial commentator Avraham Tal in the Haaretz daily.

Israel ' s Cabinet voted Sunday to cancel an unpopular capital gains tax , in a move aimed at bolstering the sagging stock market and restoring confidence in the economy .
an unpopular capital gains tax ,
Why was the tax unpopular, and among whom?