Why has billionaire businessman Idan Ofer decided to move to London?
- Move to London could save Israel Corp. chief Ofer $300m in taxes, if Israel Chemicals is sold
- All that glitters / When the public smells a financial rat, it's usually right
- In surprise move, Lapid vows to block Canadian takeover of Israel Chemicals
- Who really owns the Dead Sea?
- Moving to London, Idan Ofer may be in for a heir-cut
- The richest Israelis got NIS 10 billion richer in 2013
- Market report / Tel Aviv stocks gain, bonds sink
- Richest man in Israel, Idan Ofer, resigns from Israel Corporation board
We can probably chalk it up to a mixture of money, honor and fatigue caused by living in Israel. The fact that his mother has lived in London since his father’s death is most likely a factor as well.
On the one hand, Ofer, owner of The Israel Corporation and one of the two wealthiest people in Israel, is a bit fed up with Israel. Most of his projects here in recent years were flops, for example, the Better Place electric car venture. He's probably dead tired of reading the reports of his failures in the papers, not to mention bad press about attempts to sell the Dead Sea’s resources to the Canadians (the Potash Corp of Saskatchewan wants to buy a controlling interest in Israel Chemicals). He is probably also bracing for headlines yet to come about debt arrangements and anticipated haircuts at Zim Integrated Shipping Services.
We must admit: Ofer didn't manage to build up his image in Israel. Usually when his picture is on the page, it isn't for a reason he'd like.
It isn't coincidence. Ofer earned his negative image because of a series of transactions with the state that people suspect involved back-room sweetheart dealing. Just for one instance, some claim the Israel Corporation's purchase of Zim from the state was at a ludicrously low price.
Ofer has already left most of his executive positions in Israel. He no longer chairs or manages the Israel Corporation. He has opened offices in London and is mainly involved in international businesses, which are easier to run from the United Kingdom in any case. Israel Chemicals, his most significant remaining holding, is run by other people.
Meanwhile, clearly Ofer can save himself hundreds of millions of dollars in income tax that he will not have to pay to the State of Israel, mainly if the merger of Israel Chemicals with Potash Corporation of Saskatchewan should take place. The taxes he will be paying in London on his current dividends or the large profit he makes from this sale or that will be lower than the taxes he would pay in Arsuf, the ritzy coastal town just north of Tel Aviv where his house is.
Ofer wouldn't be the first to seek tax shelter in London. He'd be joining a very long line of Russian oligarchs and Arab sheikhs who live in the U.K. as foreign residents without having to pay tax on his business transactions outside Britain.
As a foreign resident, the Israel/U.K. Double Taxation Convention will apply to him, lowering his taxes by roughly half — from 30 percent to about 15 percent, which in his case translates to hundreds of millions of dollars over years.
As said, Ofer didn't invent the wheel. Other Israeli tycoons who moved to London include diamond baron Lev Leviev, mining magnate Beny Steinmetz, Yossi Hachmi and others. London is convenient and comfortable for the super-rich: they can live among themselves without having to mingle with the rest of the population.
Does their departure spell trouble for the State of Israel? Yes and no. Economic analysis shows it’s not all that significant: the financial means at the Israeli public’s disposal are estimated at between NIS 2.5-3 trillion, while the capital that wealthy Israelis could move elsewhere is less than one percent of that amount. (Also, given their various business debacles in the last few years, they have less money to move about than before.) In short, in national terms, it doesn't matter. If Ofer wants to move to London, let him go right ahead. It will have no effect on Israel’s economy or any of its residents except for those few who provide service to Idan Ofer himself.
Still, there is one insulting message here.
When Israelis realize that Ofer is emigrating to save money on taxes, and that the effective tax rate he will pay after the move will be significantly lower than what the public pays on a salary of NIS 15,000 (percentwise) — they will lose it.
And in their anger, they will ask themselves: “If Ofer isn’t paying tax, why should I pay VAT to the plumber? Why should I honestly report all my income to the authorities? Why should I be the only patsy in the country?”
The result: Ofer, and the stories of the other wealthy people who pay little in taxes, indirectly increase Israel’s shadow economy. They distance the people from proper governance. That is a pity.