President Trump’s proposed tax plan may decimate Israel’s vaunted high-tech industry, business analysts have warned.
Trump aims to lower the top corporate marginal tax rate from 35% to 15% in a bid to grow international investment and keep companies from outsourcing. This would likely spur foreign entrepreneurs to move their businesses to the U.S., or choose to incorporate new ones in America in the first place. And Israelis would be no exception.
“At a low tax rate of 15% in the U.S. there is a strong likelihood we will see Israeli tech companies, whose main markets are in the U.S., incorporating in the U.S.,” Sharon Shulman, the tax managing partner of EY Israel, told the Times of Israel. “This represents without any doubt a significant risk to the Israeli economy in the long term.”
Companies already based in Israel may not relocate right away, but for start-ups, the pull of America will be strong. “And that is exactly the intention of Trump,” Shulman explained.
Israel’s current top corporate tax rate is 25%, although a proposed new tax plan would cut that rate in half.