In a deal that Economy Ministry officials say benefits Israelis, the state will give the firm a large grant to be spent locally.
Intel has promised to spend at least $550 million in Israel in the next five years. The sum is part of a commitment by the company to spend a total of $6 billion to upgrade its Kiryat Gat plant for the manufacture of new advanced chips for its next generation devices. Intel and the Economy Ministry’s Industrial Cooperation Authority announced the deal on Sunday.
The $550 is part of Intel’s offset purchase arrangement with the state, which is providing the company with grants of up to $600 million over the next five years as well as a major tax break through 2023. Intel is set to receive two $300 million grants, distribution of which will be spread over five budget years. More valuable for Intel is likely to be the fact that it will have to pay a corporate tax of only 5% through 2023 (the standard rate of company tax in Israel in 2014 was 26.5%). In return, Intel committed to hiring at least 1,000 new employees, at least half of whom will be residents of communities in southern Israel. In addition, the company promised to spend at least $550 million over the period.
Some might point out that Intel is basically committing to spend what it is getting from the government in direct grants, but statements by Economy Ministry officials were enthusiastic about the benefits of the deal to the Israeli economy. “This arrangement will have a very positive effect on hundreds of small businesses and suppliers,” said Ziva Eiger, director of investments at the Industrial Cooperation Authority.
“Offset agreements such as this are platforms for leveraging public expenditures for the benefit of the Israeli economy, both for training and encouraging further expansion of small suppliers for the local and world market, and to enhance Israel’s brand as an attractive place for foreign investment,” Eiger added. “As a result of this agreement, Israelis can look forward to thousands of more jobs being available. It is a model for offset agreements that can provide benefits to all sides.”