Minister of Finance Moshe Kahlon has asked the Israel Tax Authority to consider the possibility of easing the requirements under the Law for the Encouragement of Capital Investments in order to enable more high-tech companies to benefit from it. The law allows companies to pay a reduced tax rate of 6-9% (depending on the location of the plant) instead of a 25% corporate tax rate, provided that 90% of the company's business in Israel is for export purposes.
Many high-tech companies have R&D centers in Israel that are not exporters according to the strict terms of the law. Kahlon told reports today that this was one of the measures under consideration, following the findings of Ministry of Finance chief economist Yoel Naveh that growth was slowing down in the Israeli high-tech sector.
Kahlon added that he had recently met with Israeli high-tech entrepreneurs, some of whom operate in New York, who told him that not much could be done in regulation other than changing the tax regime and offering easier approval of mergers and acquisition. He said that the way high-tech companies were coping with the shortage of trained personnel was by acquiring small companies, but that approval of these deals took too much time.
Kahlon told reporters that that increasing the tax on purchases of housing for investment had boosted state tax revenue by NIS 1.2 billion. He explained that the added revenue had been used to raise the pay of soldiers doing compulsory military service (NIS 600 million) and to provide income supplements for senior citizens (NIS 600 million).
At Kahlon's initiative, the purchase tax on housing for investment had been raised in July 2015 from 5-6% to 8% on housing priced up to NIS 5 million and 8-10% on housing priced over NIS 5 million. It was stated at the time that the tax hike was not aimed at increasing state tax revenues.
On Sunday, Kahlon will propose to the cabinet increasing the quota of Palestinian construction workers in Judea and Samaria by 33,000. 90% of the current quota of 43,000 is being used, so the rise in the quota will increase the number of these workers to over 70,000.
Published by Globes [online], Israel business news - www.globes-online.com - on February 15, 2016
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