Minister of Finance Moshe Kahlon wants Israeli investment institutions to invest more in high tech, both directly and through venture capital funds. In a meeting with senior executives from investment companies, Kahlon told them, "The situation today is preventing people from enjoying the industry's success. An increase in investment will help narrow social gaps."
Kahlon supports increasing investment by financial institutions, according to reports of a meeting late last week with senior high-tech industry figures and venture capital funds, who handed him a report about boosting investment by investment institutions in Israeli high-tech. The main points of the report were revealed on Wednesday in "Globes." The main finding was that 96% of the money entering the high-tech industry, amounting to nearly $5 billion last year, was foreign money, while only 4% was local money. In addition, as also reported by "Globes," only 0.2-0.3% of the NIS 1.5 trillion managed by institutions in Israel, including the provident funds, pension funds (new and old) and life insurance policies, is invested in the Israeli venture capital industry.
The meeting with Kahlon was attended by Erez Tsur, co-chairman of Israel Advanced Technology Industries (IATI), the roof organization of the Israeli high-tech and life sciences industry; IATI CEO Karin Mayer Rubinstein; and IATI board directors representing the venture capital funds Yahal Zilka, Magma Venture Partners founder and managing partner; Arik Kleinstein, Glilot capital managing partner; Yoav Chelouche, Aviv Venture Capital managing partner, and Yoram Oron, Vertex Venture Capital founder and general partner. At the end of the meeting, Kahlon promised to hold a meeting between the leaders of the Israeli high-tech industry and the heads of the investment institutions before the Passover holiday. At the end of the meeting, Kahlon said, "The high-tech industry is the spearhead of the Israeli economy. The current situation, in which most of the money invested in the industry is foreign money, is preventing Israelis from enjoying the industry's success."
Tsur said, "Investment in the high-tech and life sciences industries by Israeli investment institutions, both directly and through venture capital funds, should be increased immediately. The high-tech industry is the leading industry in Israel, and as such, should rely more on Israeli investors, not just foreign investment. We regard it as a national obligation, so that Israelis can also enjoy the success of the industry."
Among other things, the report by the Israel Association of High Tech Industries recommended exempting investments in Israeli venture capital funds from the 0.25% restriction on payment of management fees to other concerns (the issue of double management fees initiated by Commissioner of Capital Market, Insurance and Savings Dorit Salinger). Other recommendations included adjusting of the tax on management fees, so that there will not be a negative incentive for raising funds from Israeli investment institutions, especially a ruling that nostro investments are taxed at 25% (in addition to canceling the ruling that management fees from non-institutional Israeli investors, such as companies and private investors are charged at the marginal tax rate, making venture capital fund managers prefer foreign investors). Another recommendation was cancelling VAT on management fees from Israeli investors (management fees from foreign investors are currently VAT-exempt, while fees from Israeli investors bear the full rate of VAT).
Published by Globes [online], Israel Business News - www.globes-online.com - on March 26, 2017
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