Intel to pay Mobileye tax in dollars to avoid shekel rise

Israel sought to prevent the shekel rising further on Tuesday by agreeing to allow Intel Corp. to pay the tax due on its planned purchase of the autonomous vehicle technology firm Mobileye in dollars.

Intel agreed to buy Mobileye for $15.3 billion in March in a deal which, if completed, is expected to result in a capital gains tax payment of $1b. to $1.5 b.

Israel had initially believed the money would fund tax cuts, but the central bank was worried that converting such a large sum from dollars would further strengthen the shekel, which Bank of Israel officials have said is “over-valued.”

The Tax Authority, accountant general and Bank of Israel said in Tuesday’s joint statement that Intel will be able to pay the taxes derived from the Mobileye transaction in US dollars “with the aim of preventing an impact on the exchange rate and over-appreciation of the shekel.”

Any taxes paid from the deal could then either be deposited at the Bank of Israel as foreign exchange reserves or spent abroad by Israel on arms or other items.

The shekel has gained 7% against the dollar so far in 2017 to a 27-month high of 3.6. It is also close to a 15-year peak versus the euro and at an all-time high against a basket of currencies.

The Bank of Israel has tried to halt the appreciation through market intervention and its foreign exchange reserves hit a record high of $105.1b. in April. (Reuters)