The Israel Tax Authority plans to launch a project for mining information about taxpayers from the Internet, as part of the ongoing fight against tax evasion. For this purpose, the Tax Authority will soon publish a tender for a data mining system capable of extracting data regarding indicative economic activity of taxpayers off the web. The information collected will then be cross-referenced with the data officially reported to the Tax Authority in order to detect anomalies, discrepancies and inconsistencies between the income reported by taxpayers and their actual income and expenses.
The new project is another step in expanding the Tax Authority's use of databases for intelligence purposes. According to the Tax Authority Director, the Authority is already cross-referencing data with various registries, including vehicle registration, international travel, real estate, salaries and corporations.
In addition, the Tax Authority is expected to publish a professional circular intended to regulate the collection of value added tax, corporate tax and income tax from foreign web companies, including Facebook and Google, that operate in Israel and transact with Israeli customers. The Director of the Tax Authority explained that “in the past, in the early days of the Internet, we followed the location of the server in order to determine the source country for tax collection. Nowadays everyone understands that the server is located in country A, the entrepreneur in country B, and the customers in country C and profits slip through our fingers.” He indicated that the new criteria regarding taxation of web activity will take into account not only the location of the server, but also the permanent location of the business and its nexus to Israeli companies that provide support and maintenance. Source: Globes (In Hebrew, by: Ella Levy-Weinrib).