Tax authority won't waive Clubmarket VAT payments

The tax authorities insisted Thursday on payment of all taxes on Clubmarket's debt after the supermarket chain's trustees, Gavriel Trabelsi and Shlomo

By SHARON WROBEL
September 24, 2005 15:44
2 minute read.

The tax authorities insisted Thursday on payment of all taxes on Clubmarket's debt after the supermarket chain's trustees, Gavriel Trabelsi and Shlomo Ness, requested in the proposed creditor's arrangement submitted on Wednesday that it waive everything it is owed. Ze'ev Porat, deputy director in charge of enforcement and collection, said Thursday the authorities would not waive the value-added tax payments Clubmarket owed on both repaid and unpaid losses. Under the creditor's proposal, the trustees noted that if the tax authorities refused to waive payment of their debts, payment rates to the other uninsured creditors all of them suppliers except the banks would be reduced by 6.5 to 9 percentage points. Ness and Trabelsi had argued that the settlement, by preventing Clubmarket's liquidation, would save the state about NIS 1 billion. If chain had not been saved, the trustees said, the National Insurance Institute would have had to pay Clubmarket's employees some NIS 400 million in unemployment benefits. The government would also have had to refund some NIS 100m. worth of VAT to Clubmarket's suppliers on account of the unpaid debts, while the losses incurred by creditors would have reduced their income tax payments by some NIS 500m. The trustees had been negotiating with the tax authorities on this issue and said if no agreement was reached, the courts would have to decide. Under the proposed arrangement, most creditors would receive considerably less than what they had expected. Clubmarket will repay only 51% of its debts to major suppliers who are owed more than NIS 5m., and the banks would be repaid 81% of what they are owed. They would, therefore, have to write off NIS 72.5m. in debt. Bank Leumi, would recoup only NIS 35m. of the NIS 300m. loan it gave to Clubmarket's former owners, the Borovich family, to finance its purchase of the chain. This means that Bank Leumi will have to write off almost 90% of its loan to Clubmarket. The chain's suppliers would be paid 51%-68% of what they are owed, relative to the size of the debt. Accordingly, the repayment rate would be 68% for small suppliers, who are owed up to NIS 100,000, 63% for debts of NIS 100,000-NIS 500,000, 58% for debts of NIS 500,000 to NIS 1m. and 53% for debts of NIS 1m.-NIS 5m. Clubmarket's creditors will meet next week to decide on the approval of the proposal.


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