That’s why the Tax Authority believes there is no point in changing the law that gives tax benefits to immigrants to include foreign citizens!
Israeli law stipulates that a person who resides in Israel for 183 days of the tax year is liable for reporting income and paying tax even for income earned or derived from assets outside of Israel — even though he is not an Israeli citizen. But when it comes to giving tax benefits, only immigrants are eligible.
Israeli Shortcut organization petitioned the Finance Minister concerning the law’s inequality and its likely deleterious effect on an individual’s potential decision to become an immigrant. Israeli laws discriminate against foreign citizens and impose far stricter regulations on them. When foreign citizens compare the tax regulations of the country they come from to what they get in Israel, they see that the tax benefits of the former are far more extensive and tax liabilities are far less prohibitive.
As is well known, the foreign population faces continual hardships during their stay in Israel due to intransigent regulations which hamper their living conditions. It would only make sense for the Finance Ministry to change laws that are presently deterring foreign citizens from committing to remain in Israel.
We received a reply from the Tax Authority’s Professional Division — Real Estate Tax and Contractors Department saying that "There are only a few individuals considering aliyah to Israel who have to stay in Israel a long time before their immigration to prepare the ground for the transition." They therefore feel that there is no reason to give them the same tax benefits that facilitate immigrants’ aliyah.
Israeli Shortcut wrote back that it is not just a question of a few individuals. Tens of thousands of foreign citizens reside in Israel and existing laws which discriminate against them are a significant part of the reason for their reluctance to make the final commitment to Israel. The average number of immigrants to Israel per year in recent years is about 20,000, and the State is willing to give extensive benefits to encourage immigration absorption, return human capital to Israel and boost financial investment to the State of Israel. The foreign citizen population, which is even larger, deserves no less consideration. They should be given the additional tax benefits that would encourage them to immigrate to Israel.
The chairman of Israeli Shortcut emphasizes that the cost of giving these benefits to foreign citizens is minimal in comparison with the vast amounts that the State invests annually to directly or indirectly encourage aliyah. Foreign citizens deserve these tax benefits no less than immigrants when one considers their present economic contribution to the State and their future economic contribution if they decide to immigrate.