Likud MK Yoav Kisch stands next to protest blimp calling for Google to pay taxes.
(photo credit: Courtesy)
A blimp with the words “Google must pay tax” could be seen in the sky next to the Internet giant’s Tel Aviv offices on 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 that do business online in Israel avoid charging 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 legislation, 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 said. “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, adding that making these companies pay VAT would create an “egalitarian tax situation.”
Kisch shrugged off the argument that companies would leave the country if they have to pay more tax, saying Israel is “a local market par excellence. If they give up on [working in Israel], others will come instead. What company would leave? Would McDonald’s close franchises in Israel if taxes are raised? The level of risk is about the same.”
The Likud lawmaker 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 reduce 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 billion-$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 this is because the authority “gives in to Google and other strong companies that have the best accountants and lawyers and public relations.”
“I’m helping them,” he said.
Google’s representative 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.”