According to figures released by the Bank of Israel this week, recently introduced tax reforms levying taxes on capital gains and savings have led to increased capital flight and decreased foreign investment.
The Globes news service reported on Wednesday that capital flight is increasing, and that individuals and households in Israel deposited more than $70 million in overseas bank accounts in January alone. According to recent estimates, since 2000, political and economic uncertainty in Israel has driven more than $3.6 billion out of the country.
Foreign investment has also been steadily reducing over the past few years - in 2000, foreign investment totalled some $11 billion, dropping to $4.2 billion the following year, and just $2.6 billion in 2002. It has been suggested that this dramatic reduction in FDI can be attributed to fears that the new taxes on capital gains will apply to foreign residents as well.
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