Prime Minister Benjamin Netanyahu insisted he didn’t know that Arnon Milchan – the billionaire Hollywood producer who was his decades-old friend and later became a state’s witness in the trial against him – qualified as a returning citizen.
This was said in an attempt to undermine the prosecution’s claim, as stated in the indictment, that the prime minister tried to advocate for tax exemption extensions for returning citizens – which Milchan was and would have benefited from.
Netanyahu is suspected of allegedly pushing for several regulatory changes that would have benefited his friend while in a position of power to do so, all while allegedly receiving a massive amount of champagne and cigars from Milchan.
This is the bedrock of Case 1000, or the “Illegal Gifts Affair,” and the basis for the charges of fraud and breach of trust.
The defense is currently questioning Netanyahu on all cases in the indictment –1000; 4000, which has already concluded; and 2000, which is up next. The prosecution will then cross-examine him.
The prosecution alleges that Milchan asked Yesh Atid head Yair Lapid, who was finance minister at the time, to pass regulations that would extend the tax exemption that returning citizens get.
Netanyahu said that Milchan never spoke to him about this topic and that he himself never asked Lapid about it. “I never even knew that Milchan was a returning citizen,” he said.
“His whole life was in America – he came to visit Israel twice a year; why would I think he was an Israeli resident?” said Netanyahu.
In 2008, a legal amendment passed in the Knesset – which is the state of the law today – to exempt returning citizens from paying foreign income tax – and from declaring it – for 10 years upon their return.
Denying knowledge of Milchan's efforts
When it reached the Aliyah and Absorption Committee, the Tax Authority head at the time, Yehuda Nasradishi, said that the legislation is “quite good, it’s clear, and has a good goal – to enrich Israeli society by incentivizing citizens to return,” reads the indictment.
Netanyahu was in the opposition at this time, with Ehud Olmert serving as prime minister.
“This was great for the Tax Authority because it adds more [money] into the pot,” Netanyahu said on Wednesday but denied any knowledge of Milchan’s efforts for residency on Wednesday.
This shows that the amendment was beneficial either way – regardless of whether Milchan may or may not have benefited from it – and also that it was passed when Netanyahu was not in the directly-relevant position of power to advance it.
At the time, per the indictment, OECD recommendations were to actually shrink the exemptions rather than expand them, Netanyahu explained. “Lapid [as finance minister] fought for it; he really wanted it to go through,” he said.
When Netanyahu was questioned by police in 2017 regarding Milchan approaching him about his needs, he told the interrogators that he did not remember such a conversation.
“People don’t talk to me about their own personal issues. If Arnon [Milchan] had, I would have remembered it,” Netanyahu said on Wednesday.
“I didn’t even know he was a returning citizen – why would we have spoken about it at all?” he added. “This collapses the entire basis of the indictment against me.”
Lead defense attorney Amit Hadad said, “This indictment was written negligibly and we will prove it.”
The public trial testimony was delayed on Wednesday morning. Netanyahu began testifying behind closed doors on Tuesday already, a testimony that continued into Wednesday morning.
The testimony was closed to the press due to the nature of the topic: security matters related to activities carried out by Milchan.
Netanyahu on Wednesday asked the court to allow his testimony to end earlier, at 2 p.m., due to back pain. Lead judge Rivka Friedman-Feldman replied that the testimony would continue, with short breaks as needed.
The hearing eventually ended about two hours early, after Netanyahu said he didn’t feel well.