Southern California-Israel Chamber of Commerce Southern California-Israel Chamber of Commerce

How Tax Planning between Israel and the United States can significantly reduce your taxes

Thu, 13 May 2010 00:00:00 -0800

This article is the first of two that will provide an overview of U.S. and Israeli personal income tax and estate tax (taxes paid at the time of death). The article is intended for people who live, or plan to move to Israel, and to US parents with children in Israel. It is also relevant for business people with activity in the U.S. who are neither U.S. citizens or green card holders

As a general rule, U.S. citizens and residents pay tax on their worldwide income. Thus the U.S. taxes of an Israeli citizen residing in the U.S. and a U.S. citizen living in Israel are basically the same. Both must file annual tax returns in the U.S. and report their worldwide income and foreign bank account.

On the other hand, non-citizens of the U.S. who are not residents of the US pay taxes only on income that is generated in the United States. The income that may be subject to Federal income tax fall into two categories: income that is tied to a business in the U.S., or "passive" income, such as interest, dividends, etc.

Obviously, for a non-citizen/non-resident with significant income outside the U.S., the question of when and whether that person will be considered a U.S. resident has very important tax implications. Most non-citizens may think that the term "resident" means what it does in the world of Immigration law. However, this is not the case. For tax purposes, a person who is either a citizen or green card holder indeed pays tax on world wide income. However, non-citizens without a green card will generally be considered residents if they meet the following criteria:

a. Was in the U.S. 31 days during the year in question, and

b. Was in the U.S 183 days during the 3-year period, from the year in question and 2 years before that. However, in making the calculations, days present in the U.S. the year in question are counted as full days. Days present in the first year before that are counted as 1/3 days. Days present in the second year before that are counted as 1/6 days. So if the person was in the U.S. in 2009 the total of 93 days, and 120 days in 2008 and 120 days in 2007, the sum is 153 days. This person will not be considered a resident in 2009 for U.S. income tax purposes.

To summarize, if you have substantial income outside the US and are neither a citizen or green card holder, you need to count your days carefully. Proper planning options are available.

On the other hand, if a significant part of your worldwide income is generated in the U.S., and you are a non-citizen, non-resident, then it may be preferable to be considered a resident for tax purposes. Why? Because non-citizen non-residents pay a relatively high flat tax on the gross amount of income received and the amount of deductions they can claim to reduce their income is limited. Thus the income on which the flat tax is imposed is high.

With regard to Israeli taxation, Israel, like the United States, taxes its residents on a world-wide basis. Regardless of citizenship, an Israeli resident is taxed on income worldwide. Also like that U.S., Israel taxes non-residents only on income generated in Israel.

Does this mean that people end up being clobbered by taxes in both countries?

If this were the case, obviously few are the people that would move or invest abroad. Treaties to avoid double taxation solve this. The goal of the Treaty is to provide a tax credit in his/her country of residence for taxes paid in the other country. For example, a U.S. based taxpayer with $50,000 taxable income in Israel would be taxed in Israel at 17.5%. The U.S. taxpayer would only be required to pay additional taxes in the U.S. if his/her tax rate on the $50,000 is higher than 17.5%, in which case, the person would pay the I.R.S. only the difference. In the reverse case, the Israel-resident taxpayer is required to pay the 17.5% to the U.S., and then a Cap up to the marginal tax rate in Israel.

The most interesting scenario involves U.S citizens or residents who move or return to Israel. Under the above analysis, it would appear that this person pay Israeli taxes on worldwide income, and receive a credit for any income taxes paid in the U.S.

This is not the case, however, due to very special circumstances. First, Israel has granted substantial tax exemptions to Olim Hadashim and veteran ex-pats to attract them to move to Israel. The essence of these exemptions are that people moving or returning to Israel are exempt from taxation for a period of 10 years for all income that is generated outside of Israel. (Legislation providing investment benefits for this group is being finalized, and worth while exploring as well).

Given, however, that the person is a U.S. Citizen or resident, one would think that this income would still be taxed in the U.S. In some cases, this is the case. However significant loop-holes exist. With proper planning, the U.S. citizen with either an active U.S. business or passive income can move to Israel, and with proper planning, be exempt from taxes in the U.S. as well. This is true with regard to various types of investment income, capital gains, and most significantly, for salaries and several other related expenses paid to that person by a U.S. business, whether it is owned by that tax payer or not.

Will this income be taxed in Israel as Israel-sourced income? A complex question. Clearly, income generated in Israel is subject to Israeli tax. Yet proper planning can be highly effective. Clearly, the aim is to be fully exempt in both countries.

To summarize, the status of taxation between Israel and the U.S. is very fact specific, and depends on the status of each and every person and family. Non-U.S. taxpayers who maintain some business activity in the U.S. should plan their U.S. actions carefully and count days. With regard to U.S. Citizens and residents living in Israel or planning to do so, and with regard to families of such people, there are significant areas where proper planning can be most beneficial. And for the person or family before or after the move to Israel, the importance of having a healthy monthly stream of income in U.S. Dollars to support live in Israel cannot be overestimated. Financial security is often a key factor in determining if and how a person will enjoy the life they hoped for in Israel. Proper planning can help and have a great beneficial for all parties involved.

And as this article provides an overview of the subject, nothing in it should be construed as providing legal or other advice for any specific case.

Monte Silver, Esq.

Gideon Koren and Co. Israel

+972-3-600-5555

+1-818-705-6800

monte@gkl.co.il

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Thu, 19 Nov 2009 00:00:00 -0800

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FICC Business Opportunities February 2009

Mon, 09 Feb 2009 00:00:00 -0800

Company Name	Topimplants Ltd.
Contact Person	Mr. Adam Rahimi
Address	42/5 Leon Blum St., Haifa
Telephone No.	972-50-6987095
Fax	972-77-2080851
E-Mail	adam0marketing@gmail.com
Website	www.topimplants.com
Establishment Year	2004
No. of Employees	6
Summary of offer	Export of Dental Implants and Abutments
Description of offer	The company is manufacturer of dental implants and abutments made of Titanium and Zirconium. Looking for dealers and distributers, laboratory and dental clinics.
Target Countries	Worldwide

Company Name	GASTROLINE POPCORNIA LTD
Contact Person	Mr. Roni Berger
Address	55 Haneviyim St. Ramat Hasharon, Israel
Telephone No.	972-3-5494411
Fax	972-3-5493626
E-Mail	info@gastroline.co.il
Web site	www.gastroline.co.il
Establishment Year	1986
No. of Employees	30
Summary of offer	Import of Food and Catering Equipment
Description of offer	We are a leading company in Israel for food and catering equipment. We have our own marketing DPT for all over Israel and our own after-sales service department. We are looking for Sushi Refrigerators for the Israeli restaurants market and also all the items required for this kind of restaurants Rice equipment and newest accessories.
Potential Partner	Manufacturers.
Target Countries	All Countries.

Company Name	Zysman, Aharoni, Gayer & Ady Kaplan & Co. ZAG&K Law Firm
Contact Person	Ms. Reut Stamati, Attorney at Law
Address	Beit Zion, 41-45 Rothschild Blvd, Tel Aviv Israel 65784 Other Offices: Eilat, Rosh Pina, Boston, New York, Washington DC, Beijing, Shanghai, Branches in Europe, Desk India
Telephone No.	972-3-7955 555
Fax	972-3-7955 550
E-Mail	mail@zag-k.co.il
Web site	www.zag-k.co.il
Establishment Year	2007 (Two companies have been merged. The first one exists since 1970 and the other from 1986)
No. of Employees	120 employees ( 55 lawyers)
Summary of offer	International, comprehensive, business-oriented, legal services
Description of offer	ZAG&K offers personalized, in-depth and trustworthy counseling, which stands ready to assist its clients in making informed decisions on all matters. ZAG&K believes that in these modern and dynamic times, which present exciting business and legal challenges and opportunities, a law firm must provide clients with added value, applying broad business and legal perspectives to assist them in achieving their goals.
Potential Partner	Companies which seek assistance in the legal areas ZAG&K provides.
Activity	General Corporate and Commercial Law, Hi-Tech, Biotechnology, Communication and Media, Intellectual Property, International Trade, Mergers and Acquisition, Antitrust and Trade Regulation, Securities, Taxation, Real Estate, Environmental Law, Construction Law, Zoning, Planning and Land Use, General Commercial and Class Action Litigation, Litigation and Alternative Dispute Resolution, Banks and Banking, Debtor and Creditor, Bankruptcy, Liquidation, Insurance Law.
Target Countries	USA, China, India, Europe.

Company Name	Goood Jewelry, Judaica & Art from Israel
Contact Person	Mr. Yaron Gordon
Address	P.O.Box 253, Karmiel 20100, Israel
Telephone No.	972-54-5820776
Fax	972-4-9582287
E-Mail	yarongordon@gmail.com
Website	www.goood.co.il
Establishment Year	2005
No. of Employees	3
Summary of offer	Distribution of Jewelry and Art Objects handmade in Israel
Description of offer	Goood has been selling handmade Israeli jewelry and art objects via the internet for 4 years. The artisans featured by Goood are some of the finest and most well-known in Israel and their designs are particularly distinctive. All of the collections of unique handmade jewelry, Judaica items and the special gifts, presented by Goood, are made in Israel by a small group of highly gifted Israeli artists, who have invested their talent in their work, and more importantly, their love.
Potential Partner	Companies and organizations - such as non-profits - who would like to feature items from Israel in exchange for a percentage of the profits.
Target Countries	USA, Canada, Europe, Australia, Singapore.

Company Name	Vital Stone Ltd.
Contact Person	Mr. Tal Benvenisty
Address	15 Hamesila St., Nesher
Telephone No.	972-4-8212878
Fax	972-4-8212879
E-Mail	talbnv@vitalstone.com ; info@vitalstone.com
Web site	www.vitalstone.com
Establishment Year	2005
No. of Employees	5-10
Summary of offer	Export of Stone products and stone machinery for construction
Description of offer	Solid exporter company from the North of Israel, which specializes in the stones for construction, including tiles, pavers, cladding, roofing tiles, stone blocks for construction and machinery. Looking for business cooperation in this field international market construction companies.
Activity	Exporter
Target Countries	Africa, Europe, North America, Middle East (including Gulf Countries).

Company Name	Tik Tak Translations
Contact Person	Mr. Naftali Bar Natan, International Marketing Manager
Address	22 Haazmaut St. Petach Tikva, Israel
Telephone No.	972-3-9074555, Mobile 972-54-9025185
Fax	153-3-9074555
E-Mail	info@tiktaktranslations.com
Web site	www.tiktaktranslations.com
Establishment Year	2008
Summary of offer	Translation Services
Description of offer	Tik Tak Translations is an international translating company. We provide services to Hi-Tech companies, law offices, embassies and other companies worldwide. Tik Tak Translations is a member of an international forum of several thousand translators and translating companies from which we receive translators, recommendations and professional support. As top quality of service within deadlines is our highest priority, we have established a unique business model to maximize our quality of service by matching specific translators to specific companies.
Target Countries	All countries.

Company Name	H.M. Olami Intl. Forwarders& Customs C learer ltd.
Contact Person	Mr. Dror Hizkia / Mr. Hannan Benjamin
Address	82 Ha'atzmaut St., Haifa
Telephone No.	972-4-9114537 / 972-4-9114538
Fax	972-4-9114534
E-Mail	olami2@bezeqint.net / dror-olami@bezeqint.net
Establishment Year	1988
No. of Employees	10
Summary of offer	Logistic Services
Description of offer	Forwarding (Air and Sea), Customs C learing, Land Transportation, Marine Insurance and Warehousing.
Target Countries	Europe - Italy, France, Turkey Far East Taiwan, South Korea, Japan, Thailand, India USA, Canada

Company Name	IQ Solutions
Contact Person	Mr. Dan Rossman
Address	P.O Box 12066, Naharyia 22012, Israel
Telephone No.	972-9-9578312
Fax	972-9-9578311
E-Mail	dan@isoiq.com
Website	www.iqrep.net
Establishment Year	1995
Summary of offer	Quality Management Web Based Software
Description of offer	Looking for distributors for quality management software (web based), preferred quality consultants with marketing abilities, the software can be revised to any language.
Target Countries	All countries.

Company Name	IQ Solutions
Contact Person	Mr. Dan Rossman
Address	P.O Box 12066, Naharyia 22012, Israel
Telephone No.	972-9-9578312
Fax	972-9-9578311
E-Mail	dan@isoiq.com
Website	www.iqrep.net
Establishment Year	1995
Summary of offer	Source Inspections, Quality Audits and Suppliers Identification in Israel
Description of offer	IQ solutions performs quality control inspections and supplier quality management throughout Israel, for manufacturers around the globe. We specialize in the aerospace, automotive, medical and plastics industries. Our experience includes casting & forging sheet metal, machinery parts & electronic equipment.
Target Countries	USA, Europe

Company Name	Yam Automation
Contact Person	Mr. Micha Barnea
Address	68 Hareashonim St., Qiriyat Hayim
Telephone No.	972-4-8724064
Fax	972-4-8493461
E-Mail	michab@yam-automation.com
Establishment Year	2005
No. of Employees	12
Summary of offer	Distribution of Industrial Control Systems PLC, HMI and Motor Drives
Description of offer	We are looking for local companies that are interested in distributing PLCs and HMI units.
Target Countries	Germany, Italy, Poland, Hungary.

Company Name	Geotec Engineering & Environmental Geophysics Ltd.
Contact Person	Ms. Odelya Geotec
Address	P.O.B. 25031, Rishon-Lezion 75025, Israel
Telephone No.	972-3-9516770, Mobile: 972-54-7232402
Fax	972-3-9412150
E-Mail	geotec@geotec.co.il
Website	www.geotec.co.il
Establishment Year	2003
No. of Employees	1-10
Summary of offer	Geophysical Services
Description of offer	Geotec Engineering & Environmental Geophysics Ltd. is a leading supplier of geophysical services in Israel for mapping and characterization of the subsurface. Geotec has vast experience in domestic and international markets using state of the art technology. Performing surveys for: tunneling, railways, roads, archeology, buildings etc. using GPR, seismic, electrical methods, EM methods and vibration and air blast monitoring. The acquired extensive experience in planning and executing a variety of projects, such as national level infrastructure projects for a diverse client population, allows the company to deal with any type of project in the future. Interested in expanding the companys business activities worldwide.
Potential Partner	Infrastructures, construction and geophysical companies, academic institutes for geophysical research promotion, environmental bodies.
Target Countries	All countries.

Company Name	A.G.M Media Phone Ltd.
Contact Person	Mr. Miki Cohen
Address	P.O.B. 6563, Tel-Aviv 61064, Israel
Telephone No.	972-50-5218660
E-Mail	miki222@bezeqint.net
Establishment Year	2000
Summary of offer	Buying Currency (Dollars)
Description of offer	We are currency providers, dealing with different currencies and can handle any amount. We only deal with legitimate providers. We have Euro and we search for U.S. Dollars providers.
Target Countries	All countries.

Company Name	The Answer
Contact Person	Mr. Nissim Tshuva, Managing Director
Address	5 Hayotzrim Road, Or Yehuda 60200, Israel
Telephone No.	972-3-6343714, Mobile: 972-50-5253572
Fax	972-3-5331306
E-Mail	nissim@tshuva.com
Website	www.theanswer.org.il
Establishment Year	1989
Summary of offer	Investigation and Security Services in Israel
Description of offer	The Answer offers over 20 years of experience and specializes in knowledge and key skills dealing with: Intellectual Property Infringements International investigations Finance & Competitive Intelligence Insurance Investigations and Risk Assessments Investigation and Security Courses
Target Countries	All countries.

The labor market begins to toe the line

Thu, 15 Jan 2009 00:00:00 -0800

Help-wanted advertisements: total and hi-tech, 2006-December 2008
(2002 = 100)

Wh ile the US economy has been reeling in recent months from labor market data huge monthly job losses, sharp increases in unemployment, the Israeli economy has not yet begun to show any significant effect of the economic slowdown on the labor market. The last data point for unemployment October 2008 shows the unemployment rate steady at 6% since May, but with no sign of any upturn. Given clear weakness in many indicators of economic activity, no-one in Israel believes that unemployment w ill not start increasing, but unt il the data show the increase, analysts can argue that the slowdown in Israel could well turn out less severe than in other economies around the world.

However, unemployment is only one indicator of labor market developments and not necessar ily the most important. Other labor market indicators are already showing signs of weakness. One is the number of help-wanted advertisements (shown in the graph): called in the professional jargon a marginal employment indicator, this variable often tends to lead other labor market indicators that is, it tends to change direction (showing a recession or a recovery) before other labor market or macro-economic indicators change direction.

The graph shows a sharp downturn in this indicator of the demand for labor in the final months of 2008, both in total help-wanted ads and in ads for hi-tech personnel. A breakdown of the total into economic sectors shows a sharp increase in the demand for labor in practically every economic sector at the end of 2008: the general nature of the decline in demand by economic sector is a further proof that the decline is a macro-economic development rather than one characterizing only certain sectors of the economy.

If unemployment data are st ill not showing any signs of increase, a partial indicator of unemployment certainly is: the number of job seekers at labor exchanges run by the government's Employment Service has been increasing stead ily since Apr il 2008 through November (the last figure ava ilable). In past periods of economic weakness, an increase in the number of job seekers has tended to begin prior to the increase in total unemployment, and this may well be the case in the current period of economic weakness.

Analysts st ill want to see data showing an increase in unemployment, before they fully believe that there are serious labor market implications as a result of the economic slowdown. They may well get a first chance to do so on 20 January, when unemployment data for November 2008 are due to be published, and again during February when the Labor Force Survey the most complete dataset on labor market developments for the 4^th quarter of 2008 w ill be published.

Once the data show that unemployment has begun to increase, the main question w ill switch to: how high w ill the unemployment rate go? At the moment, that is anybody's guess.

Provided as an information service by I-Biz Israel Business Information Services Ltd. For more information on I-Biz information services, visit www.i-biz.co.il or contact info@i-biz.co.il.

What's with the Israeli consumer?

Sun, 21 Dec 2008 00:00:00 -0800

Consumer Confidence Index, 2003-November 2008
(April 2002 = 100)

One of the main signs of the global economic crisis - certainly in the US - has been drastic declines in Consumer Confidence Indexes, to levels not seen in decades. This is a particularly worrying development because of the tremendous importance of private consumption in macro-expenditure (generally more than 60% of GDP); if consumption suffers a significant decline, analysts argue, this is a telltale sign that the economy is on its way to recession. If the analysts are already concerned about the consumption situation, they consider it will get worse in 2009: recent forecasts of the negative change in consumer expenditure in the US point to 2009 being the worst year since Pearl Harbor in 1942.

How does Israel fit in to this picture? The Consumer Confidence Index (CCI) published by Hapoalim Bank, does show a decline from the high point of September 2007, which points to a reaction of Israeli consumers similar to that of consumers in other countries, but up to the present (November 2008), the reaction seems relatively limited. From September 2007 to November 2008, the Israeli CCI has fallen by "only" some 12.5% and has returned to its level in early 2006 - the November 2008 level of the index is not the lowest for decades but just the lowest for the last almost 3 years.

Can we learn from this that the situation is less bad in Israel than in other developed economies? Or perhaps, the slowdown in Israel is lagging the slowdown in other countries?

Can the CCI itself tell us anything about what is expected with consumption in 2009? A consumer confidence index is traditionally divided into 2 components, one relating to current consumption, the other - to expected consumption. If this second component declines more than the first component, this indicates an expected accelerated decline in consumption in the future. The current consumption component of the Israeli CCI declined by 7.4% from February 2008 to November 2008, while the expected consumption component dropped by a steeper 10%, pointing indeed to an accelerated decline in consumption during 2009.

Consumer confidence is not the only area where current developments look less severe in Israel than in other countries. The latest data on unemployment - for the 3rd quarter of 2008 - show no signs of increase in the unemployment rate, while in other countries - including/especially the US - the rate is already increasing significantly.

Of course, the two - unemployment and consumption - are connected. As consumption declines, so unemployment increases and the increase in unemployment will deepen the decline in consumption.

No-one in Israel doubts that unemployment will soon begin to increase (the October unemployment rate will be published on 17 December), possibly sharply. So we should not be overly "impressed" by the current limited decline in the Israeli Consumer Confidence Index: the decline in consumer confidence - and with it, the decline in consumption - is definitely expected to accelerate in 2009.

We will be checking this (as well as unemployment developments) very closely in the months ahead.

Provided as an information service by I-Biz - Israel Business Information Services Ltd. For more information on I-Biz information services, visit www.i-biz.co.il or contact info@i-biz.co.il.

Foreign trade: exchange rate and slowdown effects

Wed, 03 Dec 2008 00:00:00 -0800

Foreign trade, 2006-August 2008
($ billion, excluding diamonds, seasonally adjusted data)

Foreign trade should be experiencing some major changes at present, firstly as a result of exchange rate developments the strengthening of the shekel against most major currencies and secondly, as a result of the global slowdown together with parallel initial signs of a slowdown in Israel.

The strengthening of the shekel makes Israeli exports less competitive abroad, wh ile the global slowdown would normally reduce the demand for Israeli exports. As a result of this combination of factors, we would expect Israeli exports to be declining right now. The same strengthening of the shekel makes imports into Israel less expensive, thereby increasing the demand for them. However, an economic slowdown in Israel would generally reduce the demand for imports. The combination of factors at work, which offset each other, would be expected at least to slow the increase in demand for imports.

Despite these expectations, the graph shows the major components of both exports and imports industrial exports and raw material imports not experiencing any signs of decline or slower growth in 2008. Does this mean that there are no exchange rate and slowdown effects at work?

To answer this question, we have to delve deeper into recent data on exports and imports. Firstly, regarding exports, the trend rate of growth of industrial exports has slowed somewhat during 2008 to 1.6% in August, compared to an average 2.5% monthly in the final quarter of 2007 but st ill remains high. However, what is noticeable in 2008 is a fairly sharp decline in the share of hi-tech out of total industrial exports from 46% in 2007 (and from 48.3% in 2006) to 41.4% in January-August 2008, the lowest share since 1997. It was expected that the exchange rate and slowdown effects would be harsher for hi-tech exports than for other components of industrial exports: the current situation remains tolerable but it could deteriorate if the shekel does not continue to devalue (as it did during August) and the global slowdown worsens.

In the case of imports, the evidence regarding the influence of the two effects particularly the slowdown effect is clearer. It is true that raw material imports are st ill not showing signs of slower growth (though even here, the trend rate of growth did slow to 0.8% in August 2008, compared to an average 1.3% in the final quarter of 2008), but two other major components of imports are suffering declines in trend during 2008 imports of investment goods since May 2008 (with the trend decline accelerating from month to month) and imports of consumer goods since Apr il.

Investment goods ( Israel imports some 70% of its total investment in machinery and equipment) are a reliable indicator of industry's expectations of the future. The recent decline in consumption goods imports is in part a reaction to the sharp increase in these imports (especially of durable goods, which are also mostly imported) in late 2007 and early 2008, in response to the stronger shekel, but could also reflect initial signs of a slowdown in overall consumption, as the effect of the slowdown kicks in.

Even if the exchange rate and slowdown effects on foreign trade have been fairly limited up to now in 2008, they could well become more evident in the months ahead.

Provided as an information service by I-Biz Israel Business Information Services Ltd. For more information on I-Biz information services, visit www.i-biz.co.il or contact info@i-biz.co.il.

Is real estate booming in Israel?

Wed, 03 Dec 2008 00:00:00 -0800

Prices of owned apartments, by region, 2006 increase
(average percent change from 2005)

Source: Central Bureau of Statistics

As reported in The Marker, Israel's economic and financial daily, the New York recently published an article praising Israel's real estate market, describing it as "more attractive than the Hamptons". The article made special reference to the real estate market in Tel Aviv and Jerusalem, and indeed there is clear evidence of luxury apartment blocks being constructed in Tel Aviv, and of the purchase of luxury apartments mostly by foreigners in Jerusalem.

But the question is whether there is a boom in Israel's real estate market as a whole, or only in the luxury part of this market? The most up-to-date information on apartment prices clearly does not show an overall boom (see graph). Apartment prices did increase on average in 2006 by 5.5%, but price increases were concentrated in Jerusalem (12%) and Tel Aviv (5.3%), the two areas mentioned in the New York Times article, and also in the Sharon area (5.2%).

Not surprisingly, apartment prices in Haifa and the Northern region declined, in the wake of the July-August 2006 war, which principally affected that area of Israel, but in other area, not affected by the war (Gush Dan, Central, Southern), there were no significantly positive price developments.

This lack of overall recovery in real estate remains a dilemma, given the strong recovery of macro-economic activity over the past 3-4 years.

Even regarding the luxury market, analysts are asking about the economic sense behind all the luxury apartments being constructed at the present time in the Tel Aviv area. The luxury market is a limited market, and it is not clear that there will be sufficient demand to match the supply of these new luxury apartments.

Tracking the Israeli real estate market is likely to be extremely interesting for the foreseeable future.

Provided as an information service by I-Biz Israel Business Information Services Ltd. For more information on I-Biz information services, visit www.i-biz.co.il or contact info@i-biz.co.il.

Construction continues to resist revival

Wed, 03 Dec 2008 00:00:00 -0800

Residential construction starts

('000 apartments, annualized, seasonally adjusted data)

Source: Central Bureau of Statistics

This is the fourth time we have written about construction and real estate developments during 2006. The reason: construction and real estate continue to behave differently from the rest of the economy while the economy continues to expand (for more than three years now), construction and real estate continue to resist revival.

Data on residential construction starts for the 3^rd quarter of 2006 (published on 5 December) show this clearly (see graphs): these starts sank to their lowest quarterly level since the long recession in construction began way back in 1996. Starts had jumped in the opening quarter of 2006, raising hopes that a belated revival had begun in construction, but 2^nd quarter data dashed these hopes, and the latest data just "hammer the nail further into the coffin".

Does the decline in starts in the 3^rd quarter have something to do with the war? Quite possibly starts declined in the northern part of the country (a breakdown of starts by region is only available on an annual basis), but what is significant in general about the war period is that it had a relatively limited effect on activity in most economic sectors (except, of course, for tourism). So why should construction be different?

It is not true that there have been absolutely no signs of revival particularly in real estate. Housing prices especially of luxury housing have gone up considerably in Jerusalem, mostly because of greatly increased foreign investment in the Jerusalem luxury market. Office rents have increased significantly in Tel Aviv, as a result of the overall economic recovery. But we cannot yet talk of a clear-cut revival in construction and real estate.

Interestingly enough, one of the star sectors in the continuing stock market boom in Israel during 2006 has been construction and real estate. At the end of 2005, some investment houses recommended buying stocks of construction and real estate companies, on the assumption that 2006 would see a revival in these areas. The stocks indeed boomed but the sectors did not.

Maybe this will happen in 2007. But then again, they have been saying that for a few years now.

Provided as a service to SCICC by I-Biz Israel Business Information Services Ltd. For more information on I-Biz information services, visit www.i-biz.co.il or contact info@i-biz.co.il.

The amazing 2006 budget outcome

Wed, 03 Dec 2008 00:00:00 -0800

State budget deficit: actual v. target, 1998-2006
(% of GDP)

Source: Ministry of Finance

2006 has turned out a remarkable year, from the point of view of the economy. GDP growth remained high at 5% (compared to 5.2% in 2005), showing that the July-August war had little effect on economic performance. Israel's balance of payments registered its fourth annual surplus, with the surplus reaching an estimated $7.3 billion, almost double the 2005 surplus (the very fact of Israel having a balance of payments surplus is difficult to absorb).

And now, the budget situation: on 9 January, the Ministry of Finance published preliminary data showing that the 2006 budget deficit amounted to just 5.5 billion shekels, half of the 2005 deficit, and to be compared to a target deficit (built into the 2006 State Budget proposal) of 17.2 billion shekels. In GDP terms, the 2006 deficit was 0.88% of GDP (compared to a targeted 3%), the lowest since the growth year of 2000.

This budget outcome for 2006 is not really a surprise. Throughout the year, current data pointed to record tax revenues, resulting from the continuing economic growth. In fact, up to December 2006, the budget had accumulated a surplus: in December itself, there was a very large (seasonal) deficit, which turned the previous accumulated surplus into a deficit for the whole year.

But what about the expenditure side: should the war not have caused a vast increase in government expenditure, that should, in turn, have led to a much larger 2006 deficit than that reported? In fact, defense expenditure jumped in 2006, but the unexpected increase is included in the 2007 budget (governments can play budgetary games like this!), and it is for this reason that in early 2007, to compensate for the defense increase, the Government decided on an across-the-board 3-4% cut in the 2007 expenditure of all other government ministries.

But in the meantime, Israel can boast of a budget well under control. This is important in the eyes of the international business community that looks closely at Israel's ratio of national debt to GDP: the lower the budget deficit, the less the need for the government to increase its debt and therefore the lower the debt-to-GDP ratio. As a result of the limited budget deficit in 2006, together with continuing rapid growth, preliminary data show an unprecedented low level of the debt-to-GDP ratio in 2006.

We can therefore argue that the July-August war also had a limited effect on the government deficit at least for the time being.

Provided as a service by I-Biz Israel Business Information Services Ltd. For more information on I-Biz information services, visit www.i-biz.co.il or contact info@i-biz.co.il.

SOUTHERN CALIFORNIA ISRAEL CHAMBER OF COMMERCE IS PROUD TO HAVE CO-SPONSORED CUTTING EDGE HOMELAND SECURITY SEMINAR

Sun, 23 Nov 2008 00:00:00 -0800

Chameleon Associates LLC is the organizer of the Behind the Scenes Seminar of Israel Security, an exclusive and up-close look at terrorist mitigation methods and technologies used all over Israel, offering a unique chance to speak to Israeli directors of security at the highest levels, behind the scenes. Sponsors of the Chameleon Seminar include the Government of Israel Economic Mission and the Israel Export and International Cooperation Institute. The Southern California Israel Chamber of Commerce has been a long time supporter and sponsor of such Chameleon training and events, with a common goal of building business relationships between here and Israel. Sites on the Seminar Agenda include:

Ben Gurion Airport
Ashdod Power Plant
Karni Border Crossing
Rambam Hospital
Malcha Mall
Knesset
Central Bus Station
Israeli Shooting Techniques
Security Fence
Temple Mount, Wailing Wall and Al Aqsa Mosque
Hashalom Rail Station
Demo Explosive Detection Canines
Lebanese Border and Golan Heights

Attendees included over 30 security professionals from both public and private sectors of the U.S., Canada, Belgium, Kenya and Singapore met with high ranking Israeli security directors of ports, shopping centers, border crossings, utility infrastructures, and government facilities to learn more about the applied concepts, methods and technology used to deter acts of terrorism.

What the Participants are Saying

>> This tour is truly exemplary in terms of the 'behind the scenes' access to Israeli security managers and the facilities they protect. Organized to include a wide diversity of major critical infrastructure in a rapid pace format, the tour provided a broad and in-depth perspective of Israeli security concepts, practices, and planned evolution. The planned limited number of participants--representing many countries and security roles--facilitated a seminar learning environment with both formal briefings and tours of physical facilities. I recommend it highly for any who want to know how Israeli security arrangements really work and what is transferable to other countries.
Asst Director Office of HLS, U.S. Govt Accountability Office

>> Anyone who has the responsibility for physical security should attend this seminar. I have served over 20 years in the New York City Police Department and currently serve as Security Director for a major New York City bank. This is without question the most insightful and informative security training available, with access to, and lectures by those at the highest levels of Israeli government and critical infrastructure facilities. The techniques and methods gleaned by attending Chameleons Behind the Scenes training will greatly improve your ability to protect those whose safety you are responsible for.
Director of Security IDB Bank

>> The Behind the Scenes" seminar is by far the best educational tour that I have been on in my 30 plus years of US government and private sector service. It is a must for any security professional. I will highly recommend it.
Vice President of HLS, Alutiiq, LLC

>> I was a bit skeptical. So was my boss who paid the bill. But the Behind the Scenes Security Tour was worth every penny. I came away with many new ideas. I teach homeland security at the graduate level, and I revised the curriculum I teach all the way home on the plane.
Dr Dave McIntyre, Co-host of the public radio program "Homeland Security Inside and Out"

>> I lived and worked in Israel for two years. I have been in and out of Israel yearly for the past twenty years. I thought I had seen it all. I was wrong. Chameleon took me to places and gave me insights into the Israel security scene that were new to me and will make mebetter at my job. The things I learned would be a bargain even at a higher price.
Director Security Intl Areas, Church of the Latter-Day Saints Security Department

A Technology Showcase was held at the Tel Aviv Hilton, and presented an opportunity for a variety of Israeli companies representing the security technologies sector to discuss latest developments, to show their products and services, and explain their use in an Israeli context. Participating companies included:

Magal Security Systems
Netline
Technological and Operational Proficiency
Global Security
HyDefense (Rabintex)
Escape Rescure System
SDT

One notable highlight of the Seminar was a lovely formal dinner held for the Tour Attendees, hosted by the U.S. Ambassador Jones at his private residence in Herzliya.

The next Behind the Scenes Israel Security Seminar is slated for October 13 20, 2007. For detailed itinerary and registration information, please link to http://chameleonassociates.com/seminar07/israel.php

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