By EREZ HALFON
Recently there have been claims that we, the citizens of Israel, are funding the new tax reforms for returning residents and new immigrants. These claims are fundamentally wrong, and need to be clarified.
Within a short period, the reform, which offers tax breaks on income generated overseas for a period of 10 years, succeeded in encouraging many Jews and Israelis to live in Israel. Under the new system, new immigrants and returning citizens are able to continue running their businesses overseas in the first years of absorption without reporting the income they made prior to arriving here to the Israeli tax authorities, provided the income has already been taxed in their country of origin.
It is important to note that the reform is directed toward a specific population, for whom the tax breaks have proven to be a great incentive to move to Israel. The incentive package appeals to individuals from various professions who operate a business abroad. Since the reform was implemented, many major players in the world economy have taken advantage of the benefits and moved to Israel, where they now work.
UNFORTUNATELY, OPPOSITION to the new tax reform is being raised by people who have not grasped the contribution these immigrants and returning citizens are making. Not only does the tax reform not put a strain on the budget, but those benefiting from it have a positive effect on the Israeli economy and return the government investment in them within a short time. This is why I recommend we all focus on developing additional ideas that will encourage other populations to move to Israel.
The reform was created by the best minds in the tax field. CPA Gidi Bar Zakai, a top executive in the tax authority, headed a team which researched the concept for two years, probing the logistics and legalities of Israeli and foreign tax law. This led to a reform that maximizes the advantages to the State of Israel. No legitimate or illegitimate tax planning was generated by the new tax reform.
The team I led found that similar programs are being implemented by countries such as England, Switzerland and Canada. There is a unique window of opportunity here to invest in Israel's biggest resource - its people - and we must capitalize on it.
IN ANSWER to the critics, and as I told the Knesset Absorption Committee in November 2008, there has been an astounding 100% increase in the number of returning residents as a result of the tax reform compared to previous years. In addition, there was an increase of 3,000 new immigrants from 2008-2009 (from 15,000 to 18,000).
It is tremendously important that the Tax Authority continues to assure Jews from abroad that it will not target their overseas income. This kind of approach will encourage people to make Israel their home and contribute to our economy, allowing us to enjoy the benefits of their investments.
Jews and Israelis who return home invest and will continue to invest in Israeli businesses, employ thousands of workers, decrease unemployment, purchase day-to-day supplies, and generally contribute to Israel's GNP.
From its inception, the reform has been embraced by many in the public, including Michael Strauss, Eli Horowitz, Finance Ministry Director-General Yarom Ariav, and other leading figures on the economic scene.
FOR YEARS we have been hearing criticism that the country does not do enough to promote aliya and bring back former residents. And now, when we have finally decided to do something positive and it is succeeding, voices are raised, seeking to abolish the reforms rather than produce constructive proposals on how to increase aliya and bring Israelis home.
In this context I must emphasize that the program to increase the numbers or immigrants and returning residents does not negate the very real need for Israel to discourage people from leaving the country in the first place. This should be combined with the effort to stop the brain drain - the sooner the better.
In my opinion, the return of people such as Arnon Milchin, Sol Zachai, Shai Agassi, Yossi Chachmi, Sammy Ofer and others is a source of pride.
The writer is former director-general of the Immigrant Absorption Ministry, and was a leader and initiator of the tax reform. He currently serves as vice-chairman of Nefesh B'Nefesh, which facilitates aliya from North America and the United Kingdom.
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