"Moshe Schori, director-general of the Kadima party, and David Vanunu, head of the tax authority's investigations branch, were arrested on Tuesday in the context of a major corruption affair," Micky Rosenfeld, police spokesman told AFP on Wednesday.
Another two people, including Schori's deputy, were also arrested as part of the investigation, which centres on allegations that Vanunu ran a huge scheme to help taxpayers avoid investigation in exchange for hundreds of thousands of shekels in bribes.
Schori, who is considered to be very close to Kadima chairwoman and former foreign minister Tzipi Livni, is suspected of bribing Vanunu to drop an investigation into his wife's tax affairs, media reports said.
Schori and his deputy, Yoel Mugami, have both been suspended from the centrist opposition party while the investigation plays out, the party said.
The affair drew an acid response from the ruling Likud party, which issued a statement accusing Kadima of being a "hot house for criminals," media reports said.
In response, Kadima released its own statement noting that Vanunu was a member of the Likud Central Committee, the rightwing party's steering body.