Israel's wealthiest have found the ultimate tax hack: Not living there

These days, the alarm that goes off isn't always the one warning of an incoming missile. Israel is watching some of its most valuable citizens walk away, and the numbers tell a troubling story.

A study by Israel's tax authority reveals an acceleration in emigration since the end of the Covid-19 pandemic, but more strikingly, a shift in who's actually leaving.

Those departing today are older, wealthier and more highly skilled than in the past.

The average annual income of emigrants has jumped roughly 60% since 2020, reaching about 125,000 to 200,000 shekels (roughly €30,000 to €48,000) in 2023-2024.

The sectors hit hardest are precisely the ones Israel's economy relies on most. Departures have surged 150% in high-tech and 100% in healthcare. Among the wealthiest 10% of taxpayers, the emigration rate has climbed nearly 80%.

A Fiscal Warning Too

For the state, this is also a budget problem. Tax revenue linked to citizens who've moved abroad has grown from roughly 500 million shekels before the pandemic to 1.2 billion shekels in 2023-2024. If the trend continues, the shortfall could reach 3.5 billion shekels a year within five years.

Behind these economist's calculations lies a deeper strategic concern. When an Israeli leaves, they take their skills, experience, networks, and a piece of the country's future innovation capacity, with them.

Unlike its Gulf neighbors, "Israel doesn't have significant natural resources," notes Itai Ater, an economist at Tel Aviv University and co-author of a study on emigration. "The strength of its economy rests largely on its human capital," he adds.

The reasons people leave vary, career prospects, quality of life, or the fallout from the war. Ater notes that some depart out of concern for Israel's future "as a liberal country," committed to "the rule of law" and "democracy."

For now, Israel's economy remains solid, and its tech sector still carries considerable weight. The real risk isn't a sudden collapse but a gradual erosion.

Since 2023, Ater notes, "many engineers, doctors, researchers and academics" have been leaving in growing numbers.

Fewer engineers could mean less innovation and fewer researchers, a loss of scientific capacity, fewer entrepreneurs, and fewer startups launched. And the phenomenon risks feeding on itself: as more people leave, moving abroad becomes a more credible option for those who remain.

While security issues dominate public debate ahead of the late-October legislative elections, "opposition parties are aware of the problem and are addressing it, unlike the coalition, which hasn't spoken about it," Ater says. "At least not yet."