One of the consequences of the painful war we are all experiencing is the increased desire among Jews in the Diaspora to immigrate to Israel. The wave of global antisemitism, the perception that Israel is the safest place for every Jew, and the strengthening of the connection between Diaspora Jews and Israel are all reflected in the numbers.
Data presented in the Knesset’s Immigration, Absorption, and Diaspora Affairs Committee revealed that since the start of the war, 30,763 immigration files have been opened worldwide, with a 60% increase in the United States and a staggering 342% jump in France, compared to the same period last year.
This trend is not only welcome in terms of fulfilling the Zionist vision and addressing the moral and ethical duty of absorbing immigrants but also in terms of its potential economic benefits for Israel. We are in a prolonged war with extremely high costs, the state’s coffers are dwindling, and the deficit is surging. The arrival of new immigrants, especially those with financial resources, injects funds into the economy, boosts commerce, and increases overall economic activity – generating significant revenue at a time when every shekel is critical.
An economic study conducted in the past by researchers Prof. Elise Brezis and Dafna Aviram-Nitzan at Bar-Ilan University found that for every shekel the state invests in encouraging and absorbing immigrants from France, it gets back approximately NIS 15 in increased GDP and NIS 3.7 in tax revenue. The study also found that the contribution of French immigrants to annual economic growth averaged about 0.46%, equating to an average GDP increase of NIS 5 billion per year. The study concluded that investing in the absorption of immigrants from France is highly beneficial for the economy, yielding a return of about 1,400% in GDP terms and 274% in state budget terms.
This is even more pronounced when considering immigrants with substantial wealth who are likely to contribute to the state treasury through direct taxes, purchases, and services. Many of them also decide to establish businesses or relocate existing ones to Israel.
A ripple effect
Additionally, a significant macroeconomic factor lies in the impact of new olim entering the local economy. New immigrants, especially those with financial means, not only invest in real estate but also consume services from a wide range of Israeli service providers – from professionals in construction and renovations to financial advisers, lawyers, and accountants. These expenditures create a ripple effect: Service providers earn income that boosts economic activity and, in turn, pay taxes on their earnings, further increasing state revenue.
Moreover, the income earned by service providers fuels additional consumption – purchases of goods and services – which stimulates the economy across multiple layers. Every shekel spent by service providers creates a continuous economic cycle: They spend their earnings on new goods and services, suppliers pay taxes, and the cycle repeats.
For example, a 2022 study by Deloitte for the Immigration and Absorption Ministry found that inefficient absorption of new immigrants results in a loss of approximately NIS 2.2 million per day in potential contributions to the Israeli economy. This statistic underscores the enormous macroeconomic impact that could result from optimizing the labor, consumption, and investment potential that new immigrants bring.
However, there is a difference between the desire to immigrate to Israel and actually taking the step to do so. Many potential immigrants are currently in the “consideration phase.” Many of them have established their lives in welfare states with far better living conditions than those they are likely to encounter in Israel.
In my work, I interact with many potential immigrants, especially wealthy individuals whom Israel has a strong interest in attracting. One of their primary concerns is understanding: “Where will we live?” Naturally, they seek housing that matches the standards they are accustomed to, or at least comes close, preferably in high-demand areas. Currently, a new immigrant purchasing a home in Israel is entitled to a reduced purchase tax rate of 0.5% for a property valued up to NIS 2,527,410 and 5% on the portion above that amount. In other words, the tax exemption for immigrants applies to homes priced up to approximately NIS 2.5 million.
If decision-makers wish to translate the desire to immigrate into actual aliyah, a shift in approach is needed, along with significant actions.
In my opinion, a full exemption from purchase tax should be granted for a first residential property, without a price cap, provided there is a commitment to residing in Israel for a predetermined number of years. If the immigrant then decides to leave Israel before the specified period, they would be required to pay an increased purchase tax.
This could provide an important incentive for those deliberating the move, allowing Israel to benefit from the substantial financial contributions immigrants bring. Otherwise, Israel risks missing out on a significant economic force and growth engine – an opportunity it simply cannot afford to lose.
The writer is vice president of marketing and business development at Yafo Tel Aviv, a real estate development company.