Nefesh B'Nefesh Up in Arms Over Israel's Plan to Revoke Tax Exemption for Immigrants

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Plans to revoke the exemption on reporting assets abroad granted to new immigrants has the Absorption Ministry and immigration assistance group Nefesh B’Nefesh up in arms.

The current draft of the Economic Arrangements Bill includes a clause that would cancel that specific aspect of the 2008 reform, which gives immigrants and returning citizens a 10-year grace period during which they do not have to report assets and income abroad. Other aspects of the reform remain as they were.

The immigrant advocates say this plan is pointless, and that it would greatly harm the rate of immigration from developed nations such as the United States and Canada, which has been increasing in recent years. Erez Halfon, deputy head of Nefesh B’Nefesh and former Absorption Ministry director general, says that dropping the exemption would drive away many potential immigrants. Halfon initiated the exemption in 2008, and notes that between 2009 and 2013, the number of immigrants from North America and Britain has more than doubled.

“Hundreds of potential immigrants have already told me that they fear they’ll have to cancel their plans,” he said.

“They said, ‘You want us to report? No thanks, we’ll come as tourists and not immigrants.’ Reporting assets abroad means opening a portfolio with the income tax authorities and hiring an accountant, and immigrants are put off by this kind of bureaucracy,” said Halfon.

“It’s not clear what this kind of move does for Israel, aside from discouraging immigration. We need the immigrants’ human capital; they’re an important, strong economic engine, so why hurt them?”

Rather, the Tax Authority should be granting an extra 10-year exemption for immigrants who make significant investments in Israel, in fields such as industry in the periphery or apartments for rent, he said.

The state is losing billions in potential investments due to a lack of such regulation, he alleged.

Halfon sent Finance Minister Yair Lapid a letter at the beginning of the month defending the 2008 reform, arguing against allegations that it was akin to a tax shelter.

“The tax arrangement set in the reform is legitimate and accepted international practice,” he wrote.

“A tax shelter refers to a company that allows anyone in the world to invest there, even if he is not a citizen.”

Absorption Minister Sofa Landver said that Jews have other places they can immigrate to aside from Israel nowadays, and that the 2008 exemption increased motivation to come to Israel.

“Every shekel invested in an immigrant is returned 52-fold, so why does making things harder for immigrants seem like the right thing to do?” she said.

The Tax Authority states that the exemption needs to be canceled because it has drawn international criticism, and that Israel needs to meet international reporting standards as part of the global war on shadow economies and tax evasion. OECD member nations have criticized Israel for this exemption, it says.

Netanyahu and immigrants from North America at Ben Gurion Airport.Credit: Tomer Appelbaum
Finance Minister Yair Lapid Credit: Reuters

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