'Google must pay tax,' protest in Tel Aviv

'Google must pay tax,' protest blimp outside company's Tel Aviv office reads
By LAHAV HARKOV
04/03/2016 

Kisch bill would require Google, Facebook and other online companies with bases in Israel to pay VAT.

A blimp with the words “Google must pay tax” could be seen in the sky next to the Internet giant’s Tel Aviv offices Sunday, launched by MK Yoav Kisch (Likud) to promote a bill he is working on.

Kisch seeks to close a loophole by which multinational corporations who do business online in Israel will be required to charge Israelis value-added tax.

Currently, such companies do not have to register as businesses in Israel for VAT payment purposes.

As Kisch has not finished drafting the bill, it is still unclear whether or not Israelis will have to pay VAT on products they order online from companies based abroad, with no offices in Israel.

Kisch argued that “the law should not differentiate between major companies and small businesses.

“International corporations, which earn massive sums from Israelis, must pay VAT like any other company in Israel,” he stated. “A free market does not mean anarchy. This is a matter of hundreds of millions of shekels that could be used for welfare, health and education, money that is currently flowing out of Israel.”

The Likud MK differentiated between Intel, a company he said “invests in Israel” and other companies that “take their earnings out of Israel.”

“Why should we give up on hundreds of millions of shekels?” he asked, arguing that making these companies pay VAT would create an “egalitarian tax situation.”

Kisch shrugged off the argument that companies would leave Israel if they had to pay more taxes, saying Israel is “a local market par excellence. If they give up on [working with Israel], others will come instead. What company would leave? Would McDonald’s close franchises in Israel if taxes are raised? The level of danger is about the same.”

The Likud MK pointed out that many Western countries have dealt with problems of multinational companies avoiding paying taxes, and the OECD has addressed the problem as it applies to income tax.

The OECD and G20 countries released an international framework late last year to tackle issues with Base Erosion and Profit Shifting (BEPS), meaning tax planning strategies global corporations use to exploit mismatches in different countries’ income tax rules to lower the companies’ tax payments. According to the OECD website, a monitoring framework is expected to be implemented in 2016 for countries that choose to participate.

OECD research, which began in 2013, shows BEPS causes losses of 4-10 percent of global corporate income tax revenues, amounting to $100-240b annually.

Because the OECD published a framework on income tax, Kisch decided to focus on VAT.

The Israel Tax Authority has tried to pass a similar law several times in recent years, without success.

Kisch said the reason is because they “give in to Google and other strong companies that have the best accountants and lawyers and public relations.”

“I’m helping them,” he added.

Google’s spokesperson said in response to the proposal: "Governments make tax law, the tax authorities independently enforce the law, and Google complies with the law in every country in which we operate, including in Israel."


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