No Less Severe Than Tariffs: The Existential Threat to Israel’s Third Sector

By Sagi Balasha, CEO of Ogen

May 19, 2025 | Walla! Finance

No Less Than 6% of Israel’s GDP Depends on Donations—Mostly from the U.S. If the American administration cancels the tax benefit for American donations to charities and nonprofits abroad, thousands of non-governmental and nonprofit organizations will close, tens of thousands of employees will be laid off, and the economy will suffer a severe blow. 6% of Israel’s GDP is based on donations, a large portion of them from the U.S. The government must thwart this decree.

The American government recently announced its intention to cancel the tax deduction for donations to foreign non-profit organizations. This is a dramatic and fateful decision that could paralyze the entire non-governmental and nonprofit sector in Israel.

In the past few months, organizations working on the ground and warning of this development have encountered disbelief. “It won’t happen,” they were told. “It’s too significant.” But now it’s happening.

The U.S. administration is advancing a legislative move that will prohibit Americans from receiving tax credits for donations to foreign nonprofits—including most Israeli organizations. If passed, this will cause thousands of third-sector organizations to shut down, tens of thousands of layoffs, and extensive economic and social damage to Israeli society.

The third sector in Israel is not a luxury. It is an essential social and economic engine. No less than 6% of Israel’s GDP is linked to this sector. About 14% of the workforce is employed in it. And a large part of the donations—billions of shekels annually—come from American donors.

In fact, many non-profits in Israel rely on American donations for 30% to 100% of their total income. This financial resource sustains services in education, welfare, health, employment, and more—often where the state does not reach or cannot provide.

This is not just a private matter of philanthropy. This is a matter of national resilience.

The Israeli government must act immediately and vigorously. Just as it deals with economic decrees in trade, it must intervene here with similar urgency. The government must demand that any legislation include an exemption for donations to Israeli organizations, or at least those working in coordination with the Israeli government.

Without such a provision, thousands of organizations will collapse. Tens of thousands will lose their jobs. Vulnerable populations—holocaust survivors, the elderly, at-risk youth, victims of October 7 and its aftermath—will be left behind. The damage to Israeli society will be deep and lasting.

Now is the time for a diplomatic, political, and economic effort to stop this legislative tsunami. If this move is not stopped, we will all pay the price.

For the full article in Hebrew click here