Petition to collect VAT from foreign web companies

Advocate Guy Ophir has petitioned the Israeli High Court of Justice (Supreme Court) against the Minister of Finance and the Tax Authority, after his initial request a few months ago was not addressed to his satisfaction. Mr. Ophir's original request to the Israeli Tax Authority alleged that the Authority unlawfully exempts foreign web companies such as Facebook and Google from their obligation to pay Value Added Tax (VAT) with respect to transactions they conduct with their Israeli customers. In his petition to the High Court of Justice, Ophir alleges that the Tax Authority's reluctance to collect VAT from these companies is unlawful, because it gives foreign companies an unjust taxation advantage in relation to competing companies that operate from within Israel, and causes the State a considerable loss of tax revenue.

After the petition was filed, the Supreme Court ordered Google and Facebook to submit their preliminary response to the petition, as they may be adversely affected if the petition is accepted. Advocate Ophir expressed satisfaction with the Court's decision, which, he says requires the companies to explain their tax planning methods, and attest their arguments in an affidavit. The Tax Authority has yet to file its response with the Court, but said that it is soon planning to publish a position paper regarding the taxation of foreign companies operating in Israel through the web. Source: TheMarker (In Hebrew, by: Jasmine Guetta)