Teva to exploit new tax break, construct factory in Negev

Teva to exploit new tax break, construct factory in Negev
Haaretz - June 7, 2005
By Ora Coren

Teva Pharmaceuticals is considering building a new, $160 million plant in the Negev that would employ up to 1,500 workers, Haaretz has learned.

If Teva goes ahead with the plan, it would represent an early success for the new Law for the Encouragement of Capital Investments, which the finance and industry ministries recently hammered out in lengthy negotiations. Haaretz has learned that the new law is the reason Teva is considering building the plant.

However, a Teva spokeswoman denied that the company is planning a new plant in the Negev. She said that Teva attributes great importance to its existing Negev plant and will continue to make substantial investments in it, but it has no plans to build a new factory.

The relevant section of the capital investments law was designed to encourage large multinational corporations to make sizable investments in Israel's periphery - the Negev and Galilee. In exchange for such a company promising to hire several hundred workers in these areas, the law offers very large tax exemptions, including exemption from taxes on dividends. However, in contrast to the old version of the law, the government will not give the company grants.

Teva is one of the very few Israeli companies, if not the only one, that meets the criteria for this section of the law, known as the "strategic enterprise" track. To be a strategic enterprise, a company must promise to invest at least $160 million in a plant and have annual sales of more than $3.5 billion.

Industry sources said that Teva is considering building the factory in either Ramat Hovav or Mishor Rotem in the Negev. However, it is also considering various locations overseas. The new plant, which would manufacture some of Teva's latest drugs, would employ anywhere from several hundred to 1,500 workers during its initial years of operation - which, in the Negev, would make it a major employer.

Teva is already one of the Negev's larger employers through its subsidiary Teva-Tech, which makes active pharmaceutical ingredients (raw materials for the pharmaceutical industry). Teva-Tech currently employs some 400 workers at its Ramat Hovav plant. A month ago, Teva CEO Israel Makov said that the company plans to hire an additional 500 workers over the next five years and make investments totaling tens of millions of dollars in the Negev.

In addition to the possibility of a new plant in the Negev, Teva also plans to ask the Industry Ministry to fulfill a promise that the company says it made seven years ago: an extension of the tax breaks enjoyed by the plant where it makes its star product, the multiple sclerosis drug Copaxone, for another five years.

Teva received a rare document from the ministry giving it the status of a "pioneer enterprise," which entitles the recipient, after its seven years of tax breaks are up, to request a five-year extension. To be eligible for this extension, the company must have met its export and employment targets. But since Teva has, there would seem to be no reason for the government to refuse the request.