Eretz Yisrael Time

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Friday, March 23, 2007
It’s been a busy week for Expulsion supporters. Two more have been named in major crime scandals. The biggest this week was Hirschson, the Minister of Finance, who has apparently gave a bribe ($200,000) to some other unnamed senior politician, along with other various crimes (such as the few million dollars he apparently embezzeled).

To those of us in the Orange camp, it is merely another symptom of how morally bankrupt these people are, and how they are destroying this country with their actions.

But today I want to talk about another problem facing this country. The fact that it is nearly impossible to do business here.

It always is incredible to me how much more expensive it is to do business in Israel and how needlessly bureaucratic any process is.

Whenever you want to collect money, you can’t just fax an invoice. You need send the original copy (and if they require it in advance of paying – which many do, you can end of having to pay a VAT tax of tens of thousands of shekels out of your own pocket, before you even collect an agurah from the client). You also need to send all your tax documents so they can make sure that they don’t have to deduct withholding tax.


Don’t even ask me what’s involved with opening a simple business bank account (lawyers are actually required!).

Now every time I need to pay my software distributors/suppliers in the US, I deal with the same issue.

In Israel, if you license/resell software from overseas that costs more than $2000 a unit, then when you wire money to your overseas supplier to pay for it, the bank automatically deducts 15%-25% withholding tax – by law!

Now if your supplier isn’t familiar with doing business in Israel and other 3rd world countries, they don’t know much about US foreign tax credits and withholding taxes (up to 25%), and they just see themselves being short-changed.

Of course, if the supplier is a startup, they really are getting screwed as they may not be able to apply the foreign tax credit, and then the money is essentially lost.

Just another obstacle in the path of doing business in Israel.

But forget about business to business wire transfers.

I wanted/needed to wire some of my own private (already taxed) Israeli money into my US business account.

The bank wouldn’t let me. Not because they couldn’t do it, just wouldn’t, as they didn’t recommend it, and told me to find a different solution.

In their words, “Don’t do it. You will almost likely be taxed again on this money, there’s a lot of paperwork. This is something the tax authorities always flag. Use your private US account, send it there, and then transfer it again.

Did you get all that? A simple transaction that no one thinks twice about in the US , and the Israeli bank doesn’t recommend doing it because of the hassle and trouble it will cause.

They were looking out for my interest in an environment simply unfriendly to small businesses.

But how is one supposed to do business in Israel in this kind of environment?
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