Upon commencing her political career, journalist Shelly Yachimovich, now a member of Knesset, declared that in her opinion estate tax should be imposed in Israel. Shortly thereafter MK Amir Peretz adopted the idea and placed the issue on the public agenda.

In 2010 Yachimovich and MK Marina Solodkin proposed an estate tax bill that if passed would require that "every resident of Israel who possesses over ILS10 million  in assets shall be obliged to pay estate tax." Especially in light of the steep rise in Israeli real estate prices, the proposed law would affect many people.

What is estate tax? Estate tax is a tax levied on the assets within the estate of a deceased person. In other words, a person is taxed on his right to transfer his assets to his heirs. Many countries distinguish between estate tax and inheritance tax. Estate tax is a tax on all assets in the estate, while inheritance tax is a tax imposed on the heirs who inherit property.

Is there a moral justification to tax the estates of citizens who have worked hard, achieved success and have already paid all the relevant taxes in respect of the assets they’ve accumulated? Should they be taxed for their success and their desire to provide for their children with the fruits of their labour?

The bill’s sponsors are only trying to tax the wealthy but they are ignoring the consequences such a law would have on foreign residents, immigrants and returning residents who have come to Israel from all over the world. These people have taken tax advice they sought prior to moving their lives and livelihoods to Israel.

These people wish to transfer assets to Israel that were accumulated abroad – what economists call foreign direct investment. Israeli tax law currently encourages foreign investment into Israel and provides for a 10-year "tax holiday" from the day the new immigrant or returning resident arrives, with special incentives for import of capital and business activities.

Moves to Israel

Many people have moved to Israel from countries that imposed estate tax and invested their funds and assets in Israel. Imagine their shock if suddenly at the end of a 10-year tax holiday the Israeli taxman demands estate tax.

We wish to let Shelly Yachimovich on into a little secret: the deep pockets of those wealthy people that she wants to get into, enable them to find and pay for sophisticated tax planning structures that are completely legal. When wealthy people establish trusts, foundations and other legal structures that save their heirs from paying estate tax, the citizens left carrying the can are those middle class Israelis who bought apartments with their hard-earned savings but did not have the means to employ sophisticated tax planners.