The Israel Tax Authority is drafting a bill that would require veterans of technological units in the Israel Defense Forces to remain tied to Israel for tax purposes for ten years after their discharge. Under the proposal, any company founded by such veterans during that period would be considered domiciled in Israel and subject to Israeli taxation, even if the founder relocates abroad. The veterans themselves would also be treated as Israeli residents for tax purposes, regardless of where they live.

The authority argues that the state invests heavily in training soldiers in elite technology, cybersecurity, and intelligence units, and that many later establish companies overseas, depriving Israel of significant tax revenues. Officials say the measure would create a binding social contract to ensure the country benefits from its investment and to prevent complex disputes over an individual's center of life for tax residency.

Tax and technology experts have sharply criticized the proposal, calling it draconian and potentially unconstitutional. They argue it could violate freedom of occupation and movement, conflict with international tax treaties, create risks of double taxation, and discourage young recruits from serving in elite units. Critics also question how the law would be enforced if individuals establish residency abroad.

The Tax Authority maintains that the legislation would not be retroactive and would apply only to those enlisting after it takes effect. Officials insist the measure addresses a major loss of public revenue from high value technology exits structured overseas and say it stands a strong chance of passing despite the controversy.