Court rejects tax exemption on overseas bribes

One Israeli business tried to push the envelope by asking to deduct nearly $860,000 on taxes it paid in kickbacks.

February 13, 2008 09:47

Some companies request tax deductions for philanthropy, others for restaurants bills. But one Israeli business tried to push the envelope by asking to deduct nearly $860,000 it paid in kickbacks. The Tel Aviv District Court rejected the petition last Friday. The business, whose name was withheld by the court, asked to deduct the sum for kickbacks that were paid to help spur a business deal. Ma'ariv reported that the deal took place in an unidentified African nation. The company alleged the kickback was necessary as a part of the local business custom and therefore should be exempted from the Israeli law. The transaction was carried out in 1999, four years before Israel adopted a UN anticorruption convention. Judge Magen Altuvia ruled that an Israeli business must adhere to the values of its home nation even while conducting business abroad. The "state's values don't stop at its borders and the petitioner's request damages the bedrock of Israeli law and its legal system," the judge wrote. The business, however, countered that the business conducted in this particular country did not pose a threat to Israeli business ethics at home or in other nations abroad.

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