Court nixes petition on VAT exemption for online purchases

Amazon packages Photo: Shutterstock

The Federation of Israeli Chambers of Commerce argued that the exemption discriminates against Israeli manufacturers and importers.

The VAT exemption on orders of up to $75 from international websites will remain. Israel's High Court of Justice decided against intervening in the economic policy formulated by the minister of finance and the Israel Tax Authority. The Federation of Israeli Chambers of Commerce announced the withdrawal of its petition.

The result was good for consumers, who can continue making orders of up to $75 from overseas without paying VAT, but bad for the petitioners: local importers, retailers, and manufacturers having difficulty competing with VAT-exempt online prices.

The petitioners are not giving up; they will renew their attempt to convince the government to cancel the exemption. In any case, these efforts, both through a Knesset lobby and through personal contacts with various parties in government, will produce no results before the next elections.

Israeli average 36 overseas purchases online per year

According to figures compiled by economic department of Geocartography, online spending on consumer products accounted for 10% of retail spending by households as of late 2018, close to the global average of 9%. A survey by the Ministry of Economy and Industry found that Israel was one of the 15 leading countries in the world in the number of people buying from other countries. Israelis average 36 overseas purchases online, more than in other developed countries.

"We will explain to the public about discrimination"

The petition against the minister of finance, prime minister, and Israel Tax Authority head to strike down the VAT exemption on online purchases, what is called "personal imports," or the "VAT discrimination, as they termed it, was filed by local importers and manufacturers. The petitioners allege that the exemption discriminates against the business sector in Israel.

The manufacturers and importers, represented by the Federation of Israeli chambers of Commerce, the Manufacturers Association of Israel, and the Association of Craft and Industry were seeking to change the situation, which they say makes it difficult for them to compete on equal terms with the prices for orders from international websites, such as Amazon, Asus, and Next.

They therefore asked that the exemption be canceled, or at least applied also to online retailers operating in Israel, or to all sales in Israel. The petitioners argued, "If the authorities believe that an exemption is required to lower the cost of living, for example, fine - let them apply the exemption to all purchases, not just purchases from overseas. If the exemption is not necessary, it should denied to purchases from both Israeli and foreign businesses."

Following the High Court of Justice's failure to intervene, the Federation of Israeli Chambers of Commerce said, "Our impression from the verbal exchanges and arguments in the hearing was that the High Court of Justice had no intention of addressing questions involving the state's economic policy. For this reason, we decided to abandon the legal arena and move the struggle to the state authorities with renewed force, while making more thorough explanations about the serious discrimination currently taking place against the Israeli retail and manufacturing sector and in favor of foreign suppliers."

Published by Globes, Israel business news - en.globes.co.il - on November 5, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Amazon packages Photo: Shutterstock
Amazon packages Photo: Shutterstock
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