The Bottom Line / The Intel Tax

One evening, you will hear a knock on your door and a young man who introduces himself as a government agent will demand NIS 1,400.

One evening, you will hear a knock on your door and a young man who introduces himself as a government agent will demand NIS 1,400.

"What!" you will shout. "We've paid all our taxes and fees, we don't owe anything." But he will smile at you and say: "You owe the NIS 1,400 `Intel tax,' like every other family, because the government decided to give Intel a grant and we have to finance it somehow. So take out your wallet."

So will you pay it? Will you grumble? Will you think about unemployment in the south? Or will you slam the door in his face?

Behind this enormous grant lies a bitter personal war between Finance Minister Benjamin Netanyahu, on one side, and Prime Minister Ariel Sharon and Industry Minister Ehud Olmert, on the other. Ten days ago, Sharon proudly announced at the start of a cabinet meeting that the president of Intel had informed him that the company would build a second plant in Kiryat Gat. Netanyahu almost choked.

Intel received its first grant - $600 million, on an investment of $1.6 billion - in 1995, to help finance construction of its first plant in Kiryat Gat. In 2001, toward the end of his tenure as finance minister, Avraham Shochat promised Intel another, more modest grant, equal to 12.5 percent of its planned investment. But Intel, being accustomed to better things, wanted more. Netanyahu opposed increasing the grant, but Sharon and Olmert went behind his back and told Intel that they agreed to increase the grant to 15 percent, or $525 million, to be paid over 11 years.

Sharon and Olmert thereby achieved two goals. The first was depicting Netanyahu as someone who is preventing investment in outlying areas of the country. The second was constructing the factory, which will employ some 2,000 people directly and another 2,000 indirectly.

The huge grant that Intel received 10 years ago sparked criticism from every quarter, and the state comptroller declared it was not economically worthwhile. Today, the treasury's budget division says that the current grant is too large and makes the investment not worthwhile - or, to be more precise, it produces a meager $10 million benefit for the economy.

The problem with the treasury's calculations is that they do not take into account all the external factors. Construction of a second Intel plant in Israel will have an enormous positive impact, including revenues to suppliers and subcontractors from purchases it will make from local factories, joint development of new products with Israeli companies, the adoption of international standards of management, and the establishment of startups by engineers who leave the company.

It is also worth remembering that Intel changed the south's employment map, since most of the factory's employees are residents of the south. The plant has had a positive impact on technological-scientific education in Kiryat Gat and has thereby increased the number of Kiryat Gat high school students who receive matriculation certificates. Even the residents' self-image has improved, because they no longer depend solely on low-tech industries such as steel, wood, textiles and food. "Without the establishment of this factory and the five other factories that were built around it, we would have 30 percent unemployment in Kiryat Gat," said Mayor Aviram Dahari.

It is true that the investment grants given for years to local low-tech companies proved to be a waste of money, serving mainly to enrich the owners without in any way advancing the periphery, which continued to sink deeper into poverty. But Intel appears to have been a different story.

In October 1995, at an economic conference in Jordan, a Palestinian minister told me: "We will never be able to beat you, because your economic development is 10 orders of magnitude higher than ours. Look at Intel. It decided to invest in Israel. But it never even dreamed of investing in Nablus or Ramallah."

So perhaps it is nevertheless worth your while to put your hand in your pocket and take out NIS 1,400 - in order to ensure that Intel will continue to develop Kiryat Gat.