(photo credit: Courtesy)
Upon commencing her political career, journalist Shelly Yacimovich, now a
Knesset member (Labor), declared that an estate tax should be imposed in Israel.
Shortly thereafter, MK Amir Peretz (Labor) adopted the idea and placed the issue
on the public agenda.
Last year, Yacimovich and MK Marina Solodkin
(Kadima) proposed an estate-tax bill that would require that “every resident of
Israel who possesses over NIS 10 million in assets shall be obliged to pay
estate tax.” Especially in light of the steep rise in Israeli real-estate
prices, the proposed law would affect many people.
Many people now have
assets worth NIS 10 million – whether in homes, stores, small businesses, etc. –
but do not have significant liquid assets. A question that arises from the
proposed law is: “Would people have to sell their properties to pay taxes?” In
the United States, if such a situation occurs, then the estate taxes can be
deferred for up to 10 years. But the problem with this is that it comes with the
cost of high interest rates.
The estate tax in the US starts from a
threshold of $5 million, which a married couple can extend to $10 million. But
this may all change, depending upon the elections in November 2012.
is estate tax? Estate tax is a tax levied on the assets within the estate of a
In other words, a person is taxed on his right to
transfer his assets to his heirs. Many countries distinguish between estate tax
and inheritance tax. Estate tax is a tax on all assets in the estate, while
inheritance tax is a tax imposed on the heirs who inherit property.
there a moral justification to tax the estates of citizens who have worked hard,
achieved success and have already paid all the relevant taxes in respect of the
assets they’ve accumulated? Should they be taxed for their success and their
desire to provide for their children with the fruits of their labor? The bill’s
sponsors are only trying to tax the wealthy, but they are ignoring the
consequences such a law would have on foreign residents, immigrants and
returning residents who have come to Israel from all over the
These people have taken tax advice they sought prior to moving
their lives and livelihoods to Israel. These people wish to transfer assets to
Israel that were accumulated abroad – what economists call foreign direct
Israeli tax law currently encourages foreign investment into
Israel and provides for a 10- year “tax holiday” from the day the new immigrant
or returning resident arrives, with special incentives for import of capital and
Many people have moved to Israel from countries that
imposed estate tax and invested their funds and assets in Israel. Imagine their
shock if suddenly at the end of a 10-year tax holiday the Israeli taxman demands
We wish to let Shelly Yacimovich in on a little secret: The
deep pockets of those wealthy people that she wants to get into enable them to
find and pay for sophisticated tax planning structures that are completely
legal. When wealthy people establish trusts, foundations and other legal
structures that save their heirs from paying estate tax, the citizens left
carrying the can are those middle-class Israelis who bought apartments with
their hard-earned savings but did not have the means to employ sophisticated tax
planners.Alon Kaplan is the president of STEP Israel and the managing
partner of Alon Kaplan Law Firm. Shaun Isaacson is an intern in the Alon
Kaplan Law firm.