Tax breaks are part of the benefits program which Intel Corporation (Nasdaq: INTC) enjoys following the grant it obtained to build fabs in Israel. In 2005, the government approved a $525 million grant for Intel to build Fab 28 in Kiryat Gat, which, following an upgrade, is one of Intel's state-of-the-art fabs in the world.
One of Intel's tax breaks is a zero tax rate for the first two years of Fab 28's operations (2009-10), followed by a tax rate of 10-13%. In 2009, this tax break was expressed in a radical fashion: a report by Tavor Economic Consultants Ltd. for the Ministry of Industry, Trade and Labor found Intel Israel's revenue totaled $2.7 billion in 2009, its operating profit margin was 55% (for an operating profit of $1.5 billion), and its net profit was $1.4 billion. It paid $24 million in taxes, for a rate of just 1.6% on its operating profit. This figure includes tax payments for other years.
In 2000-09, Intel Israel paid $965 million in taxes, of which $432 million was taxes on employees and the rest was taxes on business operations. When Intel's Fab 18, its previous fab in Kiryat Gat (a fab whose future is in doubt under its current owner Micron Technology Inc. (NYSE: MU)) began operating, Intel Israel paid low taxes on high revenue and profits. Intel Israel's sales totaled $1.3 billion in 2000 and $1.5 billion in 2001, and it had an operating profit margin of 50%, on which it paid just $78 million in taxes in 2000 and $57 million in 2001.
Published by Globes [online], Israel business news - www.globes-online.com - on February 17, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
Published by Globes [online], Israel business news - www.globes-online.com - on February 17, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013