Economics Minister Eli Cohen is seeking tax breaks for high-tech companies. In a letter to the Tax Authority, Cohen said that the breaks were necessary in order to help companies that might be hurt by the changes in tax law in the United States. “A study by the Innovation Authority of the Economy Ministry indicates that there are potential dangers in the American tax changes for the Israeli economy,” Cohen wrote in his letter.
Israel is host to over 300 research and development centers for foreign companies – many of them from the United States. Among the tax changes initiated by the Trump administration is a reduction of the corporate tax rate in the U.S. from 35 percent to 21 percent, a move designed to encourage American firms to bring more of their operations back home. While no American tech firms have yet announced that they are cutting back operations in Israel and moving them to the U.S., the chances that at least some firms will do so is high, Cohen said in the letter.
The letter includes numerous suggestions to deal with the changes and encourage firms to stay in Israel, among them adjusting the tax treaty between Israel and the U.S. to reduce taxes on dividends paid by Israeli companies; tax breaks for Israeli subsidiaries of multinational tech firms; reducing personal taxes; and other ideas. The Tax Authority has yet to respond to the letter, TheMarker reported.