Scandal Causing Foreign Investors to Think Twice

Foreign investors are reexamining their investments, concerned by a possible systemic shutdown in Israel in the wake of the Tax Authority corruption scandal, Hezi Zaieg, director of the Industry and Trade Ministry's Investment Promotion Center, said over the weekend. "We don't look good in the world - investors fear the apparatus will shut down, that no one will move, that everything is under investigation and everything will move ahead slowly," he noted.

Zaieg related that representatives of Shamrock Holdings, which is currently considering to enlarge its investment in the MDS Eliran Computers factory in Jerusalem, have already asked for clarifications and wondered whether it would be possible to promote new investment approvals given current circumstances. MDS is seeking a $30 million investment to allow it to hire another 250 workers.

Over the past year, most of the support for investors switched from the grant track to the tax exemption track, for which the Finance Ministry's tax division is responsible. This new arrangement raises concerns among foreign investors that the Tax Authority will be afraid to make decisions and thus will delay investment requests.

Zaieg said their decisions are purely professionally motivated. "But," he asserted, "if someone were to come and try to link my decision to a friendship with one person or another, I'd start to fear making decisions."

The capital investments promotion law, by which the investment center operates, clearly states the conditions for approving government support of investments. Still, there are instances in which weight is given to the professional opinion of an external committee, which has the task of approving government support.

"My tendency is to help factories, to enable a business to work, not to kill it," Zaieg added.