Richest Israelis Are Getting Richer, and Other Takeaways From Haaretz's 2019 Rich List

The total capital of this moneyed mass rose by an unprecedented 30 percent in the last year – and economic and social inequality in Israel grew as well

Stef Wertheimer (left), Eyal Ofer, Miriam Adelson and Patrick Drahi (right).
Rory Lindsay, Ramy Zarenger, Herzi Shapira and Michelle.com, Eyal Taug

The tax law passed in Israel in 2008, aka the “Milchan law,” has made the country a magnet for Jewish millionaires and billionaires. The law grants new immigrants – or Israelis returning after an extended period abroad – a 10-year exemption from paying taxes and from reporting assets and income from foreign countries.

The list of the wealthiest Israelis in 2019 shows that the total capital of this group rose by an unprecedented 30% in the past year, to a total of $230 billion, as of the first quarter of 2019. While that’s an average of $460 million per person on the list – these figures don’t tell the true story: The real uptick is because two new multi-billionaires jumped straight to the top.

The two in question are Miriam Adelson, wife of U.S. casino magnate Sheldon Adelson, and oligarch Roman Abramovich. Adelson became Israel’s richest citizen this year thanks to a massive transfer of capital from her husband, and the fact that she has taken over control of his freebie newspaper Israel Hayom, considered a mouthpiece for Prime Minister Benjamin Netanyahu. Her personal worth was $22 billion as of the beginning of 2019. Russian-born Abramovich, who is worth $13 billion, immigrated to Israel and became a citizen in May 2018.

>> Meet Israel's 128 billionaires – the full list

Even if these two top entries are removed from the list, Israel’s veteran millionaires and billionaires still did quite well, with a 13% growth in capital over the past year.

Usually, when it comes to moneyed people, wealth grows exponentially thanks to compounded returns on investments. Since, in general, Israel’s economy is growing, and with it the stock market, and real estate values are also rising – the wealthy see their assets growing accordingly.

Miriam and Sheldon Adelson.
AFP

While the stock market and real estate prices increased at a relatively slow rate during the last year, they still rose. A passive investment portfolio containing bonds, stocks and real estate both in Israel and abroad would have increased in value by about 5.5% in the past 12 months. Indeed, 5% is approximately the rate by which the very well-to-do see their wealth increase every year. This explains why economic inequality is also steadily increasing: The GDP reflects wage growth that helps the population at large, and generally experiences less than the 5% annual pace of capital growth, which primarily benefits the rich.

The list of the wealthiest Israelis includes some 128 billionaires, in dollar terms. In shekel terms, there would be nearly 400. There are several reasons as to why the richest citizens are getting even richer. First off, the economy is expanding. Second, the Israeli tax code, including the Milchan law, has made the country a tax shelter for wealthy Jews from around the world. Billionaire film producer Arnon Milchan, for whom the law is named, tried to extend the exemption he had for another 10 years – and that attempt has tied him to the heart of Case 1000, the corruption affair in which Prime Minister Netanyahu is suspected of fraud and breach of trust.

Roman Abramovich.
REUTERS

To date, hundreds of millionaires have immigrated to Israel, and some have made the list of the country’s wealthiest.

Another reason for rich people getting richer is the global trend of wealth shifting into the hands of few: There are more billionaires, but fewer millionaires.

With every merger, or every monopoly that’s created – and Israeli has more than 100 monopolies, not all officially recognized as such – the monetary power of the wealthy individual increases. Take, for instance, the local communications market: Newspapers Israel Hayom and Makor Rishon are controlled by Miriam Adelson, Israel’s richest citizen; television Channel 13, which merged with Channel 10, is controlled by Len Blavatnik, 32nd on Bloomberg’s list of the world’s wealthiest people; the Globes newspaper is controlled by Anat Agmon, ex-wife of billionaire Check Point founder Marius Nacht; and even Haaretz and TheMarker has a wealthy backer: minority shareholder Leonid Nevzlin, who is nearly a billionaire. The list goes on.

The same holds true for other industries as well, including vehicle imports and infrastructure. However, Israel has also witnessed a phenomenon over the past few years – possibly unprecedented in global terms – of extremely wealthy citizens seeing their business interests collapse, including Nochi Dankner, Eliezer Fishman and Lev Leviev. Still, the overall trend of wealthy people getting wealthier continues.

Israel’s moneyed citizens wield great influence over politics and politicians, for several reasons. First off, they control the media. Second, some of them are apparently involved the country’s many corruption affairs, including the three criminal cases in which Netanyahu is currently embroiled. Third, as long as political uncertainty and chaos reign, the politicians need the tycoons even more – for their political donations and backing, and to help provide employment to those bumped out of the Knesset.

Eyal Ofer. #3 on Haaretz-TheMarker's rich list.
\ Alon Ron

In addition, the laws Netanyahu is pushing to evade criminal charges – including the so-called immunity bill (that would grant incumbent lawmakers immunity from prosecution) – which have been criticized as anti-democratic, would also protect the tycoons from facing charges for their roles in political corruption affairs.

Should Israel continue toward the political and economic models seen in Eastern Europe, not only will its economy suffer. This trend will also damage innovation and entrepreneurs’ motivation. In places where tycoons rule, personal connections matter more than innovation.

Many of Israeli’s richest don’t pay taxes – or, at least, they don’t pay at the rate imposed on average households. TheMarker’s list doesn’t include details about how much the wealthiest Israelis’ pay in taxes since that information isn’t publicly available. However, it is known that the planet’s richest citizens hold about $7.6 trillion, equal to the wealth of 8% of all the world’s households, and that some 80% of that gigantic sum is squirreled away in tax shelters, according to French-born economist Gabriel Zucman. Israel’s wealthy also use of tax shelters: Hundreds of Israelis appeared in the list of names in the Panama Papers, a disproportionate number given the country’s small size.

Investor Warren Buffett and Eitan Wertheimer.
REUTERS

The phenomenon of the phenomenally rich contributes to social inequality as well. Israel is facing a growing budget deficit, amid expectations of costly coalition deals and a slowdown in the global economy. If the government doesn’t raise the funds to cover it by levying higher taxes on the wealthy and their capital, the question is where it’s going to come from. And the answer is probably: the rest of us.

Methodology

Haaretz-TheMarker’s list of Israel’s richest people includes the Israelis whose net total assets are worth the most as far as the editorial staff could determine, based on the information available and their editorial judgment. The assets examined include holdings in companies, both private and public, and in various businesses, securities, real estate and cash.

In cases of significant involvement in foreign real estate, we were aided by valuations published by the leading international economic media outlets. Among those who got rich from high-tech startups, if five years had passed since the company was sold and the way the proceeds were divided among the founders is not known, the proceeds were divided equally. The net asset value is as of April 1, 2019, and was calculated at the exchange rate of 3.6 shekels to the dollar.

To put together the list, use was made of the following sources of information: Publicly available information; TheMarker Finance’s website, archives, the Israel Stock Exchange website, Bloomberg, the BDi-Coface website, the Companies Registrar, public relations firms and conversations with sources and associates of those ranked. Those who live both here and abroad were included in the list if they are Israeli citizens. When not obtain enough reliable information was available to evaluate a person’s wealth, that individual was left off the list.

The valuations were made by Daniel Isler, Yael Belkin, Netanel Gams, Itamar Cohen, Daniel Sofer and Amir Tadmor.