Should the Israeli government raise taxes on citizens and corporations, that might prompt the nation's companies -- such as Check Point Software Technologies (CHKP) and Nice Systems (NICE) -- to move.
During his company's most recent conference call, Teva CFO Eyal Desheh said Teva doesn't believe there is a need to relocate the company to improve its tax rate. Even though the tax rate in Israel has risen since the beginning of the year, the current rate is still among the best worldwide. Thus, relocating the company headquarters won't create a substantial advantage as it does for the American companies moving offshore.
Teva pays a very low tax rate of 9% on its profits and has received many tax exemptions so that its tax payments were even lower than it is now. Its shares, at $51, are down nearly 1% for the year to date.
But that could change. Israel's ministry of defense asked for an additional $2 billion for its 2014 budget and $3.2 billion for next year's budget. That's a 1.7% increase in this year's government budget. Once the war ends and the total economic damage becomes clearer, the minster of finance, Yair Lapid, will have to find a way to fund the potential rise in the government's budget deficit.