Tax breaks scream out to tech firms: ‘Go south’

If it wasn’t clear to tech companies before, it is now: A government decision is making the desert city of Beersheba the new tech capital of Israel.

In its latest promotion of Israel’s south as the preferred place for multi-national companies and start-ups alike for research and development, the government on Sunday approved tax breaks for cyber-security firms that open facilities in the new Beersheba Advanced Technologies Park (ATP), next to Ben-Gurion University in Beersheba.

According to the government, the tax break should generate at least 3,000 cyber-security jobs in Beersheba over the next few years, a figure that represents half the number of Israelis employed in the field now. Companies located in the ATP will get a tax reduction for each worker, reducing the tax deductions from worker salaries that companies need to send to the Tax Authority.

The tax breaks are the latest government ploy to get Israelis to move to the Negev, where the vistas are wide and the real estate costs are relatively low. Improvements in transportation in the Beersheba area over the past decade — including the extension of Israel’s “national toll road,” Road 6, and the development of fast rail service — have led to a doubling of the population in the city and its suburbs, as well as advanced development of “outer ring” cities like Dimona and Ofakim. With ATP, the government hopes to bring more jobs to the area as well — giving Israelis more incentive to leave the crowded Tel Aviv area and follow employment opportunities down south.

ATP’s first “customers” are mostly cyber-security firms, including several cyber development programs and R&D centers, among them an incubator sponsored by Jerusalem Venture Partners, and an R&D facility of US aerospace company Lockheed-Martin, which is working with security firm EMC. In the coming years, many more kinds of tech companies are expected. The park, being built together by Ben-Gurion University, the Beersheba Municipality, and US company KUD, is set to include over 20 buildings with a total area of about 200,000 square meters, with offices, laboratories, and commercial areas.

ATP is just the beginning. The Israeli military (IDF) is also building a large technology campus near Ben-Gurion University, as part of the transfer of select IDF units to the Negev. The technology campus will become home to specialized IDF technology, cyber-defense, and military intelligence units, which will be transferred from Tel Aviv. In addition, the IDF is building an intelligence complex just outside Beersheba, in addition to a major training base for new recruits.

Already today, Beersheba leads the country in turning out engineers, with about 1,400 graduating annually, thanks to BGU and the Shamoon College of Engineering, also located in the city.

It’s a given that Beersheba will be the country’s next major tech center, said Ben-Gurion University President Dr. Rivka Carmi “The business center will remain in Tel Aviv, but as in the US, there are many ‘centers’ for different industries outside New York. In Israel, I think it’s inevitable that Beersheba will become the new technology center for the country, considering how many companies will be opening R&D facilities here, and how many engineers we turn out each year. I see us becoming the center for cyber-defense technologies, big data, and other areas.”

According to Prime Minister Benjamin Netanyahu, developing Israel’s cyber capabilities “is a strategic necessity, bringing together global economic opportunity and strategic need. We must take determined action to lead in both of these areas. Cyber-security continues to develop as a main component of our national security and also as an important layer of the Israeli economy. We are now on the superhighway of competition for the heart of the market — and these tax breaks provide Israel with another advantage” that will attract local and foreign companies to Israel’s new Silicon Wadi.