Israel’s Finance Ministry and Innovation Authority are now leaning toward two grant funds as the fastest and safest response to the weak dollar, which has hurt the country’s tech sector. The idea is to use grants rather than a deeper tax overhaul, because that would be slower and much harder to implement before the election.
One proposed fund would exceed 1 billion shekels and back Israeli growth companies and multinational development centers. It would pay a grant of several thousand shekels for each Israeli worker hired by foreign development centers or by Israeli growth companies, private or public, in order to reduce the risk that jobs and engineering teams are moved abroad. A second fund, estimated at 400 million to 700 million shekels, would support early-stage startups that can show the dollar’s decline has created cash-flow problems. As an example, a startup that raised $10 million a year ago now effectively has only $8.8 million in spending power, which can derail growth plans.
Industry leaders, including Meta Israel chief executive Adi Sofer Teeni, Microsoft R&D chief Michal Braverman-Blumenstyk, Glilot Capital’s Erel Kleiman, and Kaltura executives Ron Yekutiel and Batshva Moshe, together with the Israel High-Tech Association and IATI, asked Finance Minister Bezalel Smotrich and his team to consider helping employers by allowing taxes and some social security-related payments in dollars. Smotrich said on Wednesday that dollar-based tax payment is being examined, but added, “To the best of my knowledge, there is no country in the world that allows this. Every country, as part of its sovereignty, operates in its local currency.”
A source familiar with the matter said the dollar-tax option is complicated, would require legislation shortly before the election, and could significantly raise government spending because the state would absorb currency-conversion costs. Others think it may be postponed until after the election, although Smotrich’s comments suggest the debate could accelerate. The grants mechanism, by contrast, already exists and has been used in crisis funds during the coronavirus pandemic, at 700 million shekels, and after the war in Gaza, at 400 million shekels. Innovation Authority head Dror Bin said startups, growth companies, and multinational R&D centers are all being hit differently, and warned that overseas corporate decisions could cause more development work to leave Israel.
