RESTRICTED
WORLD TRADE G/SCM/Q2/ISR/2
21March 1997
ORGANIZATION(97-1176)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Questions from theEUROPEAN COMMUNITY Regarding theNew
andFullNotification ofISRAEL1
Thefollowing communication, dated 12March 1997, hasbeenreceived fromthePermanent
Delegation oftheEuropean Community.
_______________
Israelsubmittedon26October1996itsnotificationofsubsidyprogrammestotheWTOpursuant
toArticle XVI:1 GATT 1994 andArticle 25oftheWTO Subsidies Agreement.
Inthisrespect, theCommunity would liketoobtain clarification onanumber ofissues onthe
notified scheme asdescribed below.
Moreover, theCommunity hasobtained information ondifferent subsidy schemes which were
notnotified totheWTO although theirnotification seems necessary pursuant toArticle 25.2ofthe
Subsidies Agreement.
I. NOTIFIED SUBSIDY PROGRAMMES
(a) Research andDevelopment Grants
Israel states thatthisprogramme consists ofsubsidies within themeaning of
Article 8.2(a) oftheSCM Agreement. Could Israel provide thecriteria inaccordance
withArticle 8.2(a)? Arethesecriteria reflected inthelegislation? Hasthisprogramme
been(orwillitbe)notified under Article 8oftheSCM Agreement?
(b) Magnet
Israel states thatthisprogramme consists ofsubsidies within themeaning of
Article 8.2(a) oftheSCM Agreement. Could Israel provide thecriteria inaccordance
withArticle 8.2(a)? Arethesecriteria reflected inthelegislation? Hasthisprogramme
been(orwillitbe)notified under Article 8oftheSCM Agreement?
1G/SCM/N/3/ISR+Corr.1-G/SCM/N/16/ISR+Corr.1.G/SCM/Q2/ISR/2
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(c) Incubators programme
Israel states thatthisprogramme consists ofsubsidies within themeaning of
Article 8.2(a) oftheSCM Agreement. Could Israel provide thecriteria inaccordance
withArticle 8.2(a)? Arethesecriteria reflected inthelegislation? Hasthisprogramme
been(orwillitbe)notified under Article 8oftheSCM Agreement?
Could Israel provide anoverview oftheindustry sectors which havebenefitted from
thethree R&D programmes?
(d) TheEncouragement ofMarketing Fund
Thisprogramme appears tobecontingent upon export performance. Could Israel
comment onthecompatibility ofthisprogramme withArticle 3.1(a) oftheSCM
Agreement andexplain whythisprogramme isstillinforce.
(e) Reduction ofenvironmental hazards
Israel states thatthisprogramme consists ofsubsidies within themeaning of
Article 8.2(c) oftheSCM Agreement. Could Israel provide thecriteria inaccordance
withArticle 8.2(c)? Arethesecriteria reflected inthelegislation? Hasthisprogramme
been(orwillitbe)notified under Article 8oftheSCM Agreement?
(f) TheImport Liberalization Fund
Thisprogramme aimstoassist Israeli companies against increased import competition.
Theprogramme appears toprovide subsidies upontheuseofdomestic overimported
goods. Could Israel provide thecriteria foreligibility andexplain howcompanies
areselected.
Could Israel comment onthecompatibility ofthisprogramme withArticle 3.1(b) of
theSCM Agreement andexplain whythisprogramme isstillinforce.
(g) Theencouragement ofCapital Investment
- Thisprogramme covers anumber ofseparate incentives withdifferent criteria
foreligibility. TheCommunity requests aseparate notification foreach
programme e.g.taxincentives, grants, loanguarantees etc.
- Israel states thatthisprogramme consists ofsubsidies within themeaning of
Article 8.2(b) oftheSCM Agreement. Could Israel provide thecriteria in
accordance withArticle 8.2(b)? Arethesecriteria reflected inthelegislation?
Hasthisprogramme been(orwillitbe)notified under Article 8oftheSCM
Agreement?
II. ADDITIONAL PROGRAMMES NOT NOTIFIED TOTHE WTO
Israel hasnotnotified anumber ofprogrammes which appear tobenotifiable under Article 25.
TheCommunity findsthattheschemes described below provide afinancial contribution which confers
benefits tothelocalindustry. Inaddition theschemes areclearly specific (aspertaining toaspecific
sector orcontingent uponexports). Inaddition tothespecific questions asked, theCommunity would
likeclarification whytheseprogrammes werenotnotified totheWTO andrequests that,ifappropriate,
Israel supplies anotification under Article 25,using thestandard format.G/SCM/Q2/ISR/2
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1. Incentives under theCapital Investments Law
TheCommunity found thatunder thecapital investments lawanumber ofadditional incentives
areavailable which arenotcovered bythenotification. Ifacompany isgranted thestatus ofan
Approved Enterprise, thefollowing additional benefits areavailable:
- Fulltaxexemption for10years iftherighttoreceive grants iswaived.
- Exemption from realestate property tax
- Reduced taxratesonincome from thesaleofproperty
- Accelerated depreciation
- Wage subsidies
2. Equity infusions
InJune1992, theGovernment ofIsrael established theYozma Venture Capital Ltd., an
investmentfundwhichissubsidizinginvestmentprojects.Thefundinvestsinexport-orientedtechnology
based enterprises uptoUS$2 million holding amaximum of49%oftheshares.
3. Export financing
Israel provides loans atpreferential interest ratestofinance production forexport including
theimport ofrawmaterials andcomponents.
4. EilatFreeTrade Zone
Inorder toattract investment intheareaofEilat, anumber ofsubsidies aregranted for
companies located inthatzone:
- exemption from value added tax;
- arefund ofupto20%ongross wages paidtoemployees.
5. FreePortZones
Theportzones ofEilat, Ashdod andHaifa arefreeports withanumber ofincentives forthe
companies located inthese zones:
- exemption from alltaxes onincome forseven years;
- reduced taxof15%ondividends paidout;
- exemption from capital gains tax;
- exemption from property tax.
6. FreeExport Processing Zone
Legal basis: theFreeExport Processing Zone Actof20June1994.