•  Changes in the composition of the assets portfolio, i.e., switching between local-currency and foreign-currency assets, is affected by considerations of taxes which were introduced in a period when no NIS/foreign-currency market existed in Israel, and which needlessly affect the exchange-rate appropriate for Israel at any time. In this way one of the pillars supporting Israel’s economic growth-foreign trade-is undermined.
•  The tradability of the government bond market is adversely affected as tax rules effectively exclude households from this market-another blow to the infrastructure of any advanced capital market. •  The tax distortions deter foreign financial institutions from developing services for Israelis, thus also impairing the financial markets in Israel.