How to achieve any deal – peace, skyscraper, or M&A?
On October 13, US President Donald Trump delivered a speech in the Knesset. It seems 119 Knesset Members were impressed, one had to be removed. What was impressive was the way Trump launched a 20 point peace plan beginning with the release of 20 living hostages. Trump was ably assisted by Special Envoy Steve Withkoff and Jared Kushner. The way ahead will be extremely difficult. But Trump seems determined to see it through as Chairman of the Peace Board.
What is Trump’s technique and what can we learn on the business/tax front? We might not know that officially for many years.
Our guess based on Trump’s experience of building New York skyscrapers is: bargaining chips. He called them “playing cards” in his bust-up with Zelenski earlier this year. Trump reportedly used bargaining chips to entice a number of Arab countries to his side which in turn gave him more bargaining chips to use against Hamas.
Bargaining chips in business and M&A deals:
Supplying good quality products and services builds up businesses. But turning this into a popular brand name results in a bargaining chip in any M&A (merger / acquisition) deal.
Exclusivity deals that shut out competitors build up more bargaining chips.
Then there is technology. President Trump praised Israeli Innovation Centers in his Knesset speech.
The book Start-Up Nation by Dan Senor and Saul Singer says the Israeli spirit of innovation and improvisation helped Intel build up bargaining chips on Wall Street some years ago. That spirit may now be helping Invidia.
Other bargaining chips in business include: a good niche; good cash flow or profitability; good allies; faster at something; motivated personnel; orderly management; energized entrepreneurs. All these features help spur M&A deals to an appropriate valuation.
Bargaining chips in tax:
The Israeli tax Authority (ITA) has a tough reputation, but reasonable compliance with the tax rules gives a taxpayer bargaining chips with ITA officials. Tax officials are on the look-out for unreported transactions and dodgy characters. They move on when they see a compliant taxpayer. Reporting deadlines – monthly and annual – are best met. A good accountant helps with such tax compliance. (NB the author is an accountant…).
Good records also help. In Israel, keeping good books and issuing invoices on approved software is a legal requirement
A business requires a “Good Taxpayer” confirmation from the ITA in order to do any business with a “public body” which is any governmental or municipal body and any public company. And the new Israel Invoice requirement requires businesses to obtain electronically an approved invoice number from the Israeli tax Authority (ITA) for most transactions above NIS 5,000-10,000
Paying due tax on time also builds up bargaining chips. We advise clients to pay any tax balance due within two weeks after filing signed annual tax returns. This is so the ITA tax collectors don’t chase them with a bank lien (freeze). Bank liens happen all too often as tax demands often take month to arrive due to a poor postal system in parts of Israel.
So all the above items are good bargaining chip for taxpayers – keep good books and pay your taxes – Israel is a small country.
Tax planning bargaining chips:
What else? Tax planning, of course. Exploiting loopholes happen all the time. But sometimes they are based on an aggressive view not intended by the Knesset. Sometimes loopholes assume the ITA won’t find out. But technology means the ITA finds out more things now. Not the way to build up bargaining chips
By contrast, the ITA is happy to help when taxpayers exploit tax incentives. For example, the 10 year tax holiday for foreign income of new residents. Also there is a 35% tax credit for donations to Section 46-approved Israeli charities or equivalent charities in the US under the US-Israel tax treaty (up to prescribed limits).
For maximum bargaining chips, you can claim lower tax rates for Israeli (not Delaware) preferred enterprises. Preferred income derived by preferred industrial and technology enterprises is liable to company tax of 7.5% in development area A, 16% elsewhere in Israel, without time limit. Dividends are generally taxed at 20%. The resulting combined tax burden on distributed profits is generally 26% – 32.8% subject to any tax treaty. Lower rates are possible for certain large enterprises with annual revenues over NIS 10 billion. Nasty new rules for undistributed “trapped” profits don’t apply to industrial or tech companies.
In conclusion:
Trump deploys bargaining chips. We can all do so….
Next steps:
If you are contemplating an M&A deal, please contact us asap about marshalling your bargaining chips – tax and others.
As always, consult experienced advisors in each country at an early stage in specific cases.
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The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.
© Leon Harris 30.11.25