Finance Ministry Recommends Against Taxing Artificial Intelligence
Israel's Finance Ministry recommends against taxing AI, warning of economic harm and recommending alternative tax sources like vacant land and corporate.
Jerusalem, 29 September, 2026 (TPS-IL) — Israel’s Finance Ministry is recommending against imposing a dedicated tax on artificial intelligence (AI), robots, or computing power, according to a staff assessment submitted to Finance Minister Bezalel Smotrich on Tuesday.
The assessment, led by Chief Economist and State Revenue Administration Commissioner Shmuel Abramzon, warns that such taxation would generate more economic harm than revenue and drive technology companies out of Israel.
Instead, the Finance Ministry recommends strengthening tax collection from sources less directly tied to employment, including vacant land, undistributed corporate profits, and consumption.
The assessment warns that AI could gradually erode the tax base by replacing workers, suppressing wages, and shifting some services and profits overseas. It also calls for greater tax certainty for AI-based activity and stronger enforcement against shifting income abroad.
The ministry’s research is continuing, with updated recommendations expected in the coming months.