Israeli tech employees netted staggering $4.5-6 billion through options in 2021
The Tax Authority's report reveals the huge sums that flowed into the accounts of 200,000 high-tech employees
Around NIS 15-20 billion (approximately $4.5-$6 billion) flowed into the accounts of high-tech employees from exercising options and shares in 2021. This amount does not include their actual salary, but only what is known as "capital compensation". This amount, after tax, made its way to the accounts of approximately 200,000 employees.
These numbers do not include sums received by entrepreneurs and investors, but just salaried employees. Together with the entrepreneurs and investors, the amounts swell even further.
This is a conservative estimate, as some of the taxes paid on the sale of shares do not go through trusts but are deducted by the employers through the employees' paychecks. These numbers were derived from the Tax Authority's report published at the end of last week where they were “hidden” in a small line called "deductions by trustees" which rose to $1.35 billion (4.5B NIS) last year.
This amount of income tax is roughly between 25%-30% of the capital gains received from the high-tech community, which pays a capital gains tax of 25% on exercising options, the sale of shares in secondary transactions, and the sale of restricted shares (RSU).
No less surprising is the fact that in the first half of 2022, when the capital market weakened dramatically, the rate of realizations was maintained and industry employees netted an additional $2-$3 billion (NIS 7-10 billion), which was reflected in tax revenue of $850 million (NIS 2.8B).
There are three companies operating in the Israeli market today that manage the capital reward programs for the employees of the high-tech industry, as in options and blocked shares. These three companies - IBI Capital from the IBI Investment House, ESOP of the Excellence Investment House and Altshare of Altshuler Shaham, divide the market between them, with IBI Capital and ESOP each holding about 40% and Altshare having 20%.
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These companies manage programs for about 200,000 employees in Israeli public companies that are traded on Wall Street such as Check Point, Solaredge, Nice or WIX, international companies that have development centers in Israel including Apple, Amazon, Intel or Google, as well as large startup companies, which include unicorns and companies worth several hundred million dollars.
Tal Dori, CEO of IBI Capital, pointed out that his company alone dealt with taxable income of $9 billion, of which around $660 million was paid to the Tax Authority.
According to Ronen Solomon, CEO of Altshare, his company also deducted a similar amount. According to market estimates, ESOP, which is managed by Odelia Pollak and where the compensation plans of most of the international companies operating in Israel are concentrated, dealt with taxable income of about $15 billion.
