Israel rises to 35th place in World Bank's Ease of Doing Business report

"his is an important achievement. It needs to be continued," Prime Minister Benjamin Netanyahu said.

A general view of Tel Aviv's skyline is seen through a hotel window in Tel Aviv, Israel May 15, 2017. Picture taken May 15, 2017 (photo credit: AMIR COHEN/REUTERS)
A general view of Tel Aviv's skyline is seen through a hotel window in Tel Aviv, Israel May 15, 2017. Picture taken May 15, 2017
(photo credit: AMIR COHEN/REUTERS)
Israel jumped 14 places to be ranked 35th among 190 countries in the World Bank’s Ease of Doing Business report, published by the Washington financial institution on Thursday.
The annual report, which also saw Israel rise from 54th to 49th place worldwide last year, evaluates regulations enhancing or constraining domestic business activity for small and medium-size enterprises over a 12-month period. Focusing on the largest business cities of each economy, the report evaluated ease of business in Tel Aviv.
The final ranking is based on regulations affecting 10 areas of the life of a business. Israel’s significant rise in the rankings, the report stated, was due to regulatory improvements in starting a business, getting credit, paying taxes and cross-border trading.
New Zealand, Singapore and Hong Kong were ranked as the three leading economies for ease of business. At the other end of the spectrum, Somalia, Eritrea and Venezuela were found to be the most difficult locations for business activity. The West Bank and Gaza, based on the evaluation of business in Ramallah, were ranked in 117th place worldwide, slipping one place since last year’s report.
Commenting on the report, Prime Minister Benjamin Netanyahu welcomed Israel’s improved ranking.
“There are approximately 200 countries, and we rose last year from 54th place to 49th place, and this year we jumped to 35th place – a very large jump,” Netanyahu said. “There is still some way to go, but the praiseworthy work carried out by the Finance Ministry, the accountant-general, the Justice Ministry, and our office is changing the face of the Israeli economy. This is an important achievement. It needs to be continued.”
During the past year, the report said, Israel had made starting a business easier by allowing joint registration of corporate tax and value added tax. Access to credit information had also been improved by reporting both positive and negative data on individual borrowers.
In addition, Israel made paying taxes easier by introducing an electronic system for filing and paying value added tax and social security contributions. Decreased corporate income tax rates had also made paying taxes less costly.
Finally, the report cited an improvement in cross-border trade. Exporting had been made easier through the elimination of the certificate of origin requirement, subsequently decreasing the time and cost of export documentary compliance.
“It turns out that reducing taxes is one of the important factors that boosts us in the rankings,” said Finance Minister Moshe Kahlon. “But this is tremendous news for the Israeli economy, and it’s a signal and message to global markets and to international investors: Come to invest here, it’s much easier to do business and there is much less bureaucracy. And, of course, for the rating agencies who see that the State of Israel is heading in the right direction.”
According to Daphna Aviram-Nitzan, the director of the Israel Democracy Institute’s Center for Governance and the Economy, the World Bank’s report plays an important role in the decision-making process of international investors and businesses.
“When investors all over the world decide where to locate their next investment, they look at the tax rate in each country, the growth rate and so on – they also look at the ease of doing business,” Aviram-Nitzan told The Jerusalem Post. “Time is money so they want to go to places where it is easy to do business. If it is hard to pay taxes, enforce contracts, to get electricity and permits to start businesses in one country, they will prefer to pay more tax and not face such heavy demands in another country.”
The Israeli government has made great strides in tackling the regulatory burden in recent years, she said, including the introduction of a Regulatory Impact Analysis (RIA) requirement for new government regulations and the establishment of the Better Regulation Department in the Prime Minister’s Office.
Despite leaps forward in recent years, Aviram-Nitzan believes the next key step is to digitize all its bureaucratic procedures, a move that could propel Israel into the leading nations for ease of business. The successful introduction of an electronic tax system should provide a case-study for other government ministries, she said.
“If you integrate all the regulatory requirements into one digital system, then you achieve uniform demands for business and everyone is speaking the same language,” said Aviram-Nitzan. “Rather than additional regulators, it is a digital one-stop-shop for businessmen, who can send documents by e-mail, an application or any digital system. Then you can make the biggest jump forward on the index.”
    


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