For those who conduct a business from home a portion of household expenses, such as rent, utilities and telephone, are deductible. Special regulations apply to deducting automobile expenses. The Ministry of Industry and Trade views small and medium-sized businesses as an important source of economic growth and the creation of economically stable employment. Small and medium-sized businesses are defined as businesses employing 1-100 employees.
Foreign Trade As a small economy with a relatively limited domestic market, Israel is highly dependent on foreign trade. Exports have been a catalyst for Israel's economic growth.
In its early years, the Israeli economy was micro-managed by the government, which not only controlled companies but also imposed strict rules on the capital markets, trade, land development and labor relations. Although there has been substantial liberalization in recent years, by Western standards, the Israeli government continues to be interventionist. All commercial enterprises must have business permits in order to operate. Permits are usually issued by the municipalities after prior approval by other government departments such as the Ministry of Health. Permits must be renewed annually. The progressive system of taxation makes maintaining stable income of the small businesses quite hard. The highest rate of income tax is 50%. Together with payments to National Insurance it makes quite large monthly payments that small domestic enterprises must subtract from their income. An average extra time that small business spends on paper work yearly is 220 hours.
In recent years, the Israeli telecommunications sector has been developing at a rate that can only be described as revolutionary. Bezeq remains the dominant player in Israeli telecommunications. This company is owned partially by government and provides local and long distance service inside the country. International long distance services have traditionally been a monopoly of Bezeq.The multi-channel subscriber TV market currently comprises three cable television operators (Matav, Tevel, Golden Channels), as well as a single DBS (Direct Broadcasting Satellite) operator (Yes). Cable TV home-pass extends to 97% percent of households, and about 60% of all households subscribe (1,082,000 cable-connected households). Internet penetration is also growing quickly. Four major, and about 60 smaller, Internet service providers serve more than two million users, including 40% of households and 60% of businesses. There are 5.5 million cellular telephone subscribers in Israel, translating to over 85% percent penetration, a growth of more than one million subscribers over 2000, and compared to only 125,000 subscribers. There are four cellular operators in Israel. Three operators are privately held (the fourth, Pelephone, is held equally by Bezeq and a private company), and all provide countrywide coverage and modern network services. The second operator, Cellcom, uses IS-136 TDMA technology and is going to deploy a second, GSM network, while Orange (Partner Communications), the third operator, uses GSM technology. Media plays a very important role for Israeli population. Radio and newspapers are the main source of news for every family. There are 21 radio stations that legally operate on the territory of Israel. They broadcast in Hebrew, Arabic, French, Russian and English. Newspapers are also published in several foreign languages as well as in Hebrew. According to recent statistics every third family is subscribed to a daily periodical.
(Sources: http://www.moc.gov.il; Ministry of Communication)
The government of Israel sponsors several types of incentive programs to industrial enterprises located in Israel that meet certain criteria. Government support is provided primarily to industrial and tourism enterprises that assist the nation in meeting its overall economic objectives. These objectives include competing in international markets, utilizing innovative technologies, creating employment, producing high added value products and generating income in foreign currency. Government incentives, which include grants as well as tax benefits, can generally be grouped into three categories: investment incentives, industrial R&D incentives, and export-linked incentives. Companies at all stages of the corporate life cycle have the opportunity to benefit from the different incentive programs providing they meet the criteria determined by the government. Today Israeli government owns 114 companies in various fields. Among them such giants as “Bezeq” and Israel Electric Corporation (IEC). "Bezeq" The Israel Telecommunication Corp., Israel's former telecom monopoly, is facing an open market. The company, which controls the country's fixed-line phone services, has been reducing costs to stay competitive. It also is Israel's #1 broadband ISP and owns 50% of leading mobile phone company Pelephone (Motorola is selling its half). Bezeq's fiber-optic network is fully digitalized and has 3 million access lines. A government plan to sell a 50.01% stake in Bezeq is back on track after being stalled after the company's once-largest private shareholder, Gad Zeevi, was implicated in a financial scandal. The Israeli government owns 54.6% of Bezeq; Zeevi Communications owns 20%.
However, Israel's development of an entrepreneurial high-tech economy over a few short years and against immense odds is a remarkable achievement. In the last five years, Israeli high-tech companies have probably produced more millionaires than Israel had during its first 45 years of existence.
(Sources: www.ahavat-israel.com)
