Finance Minister Avigdor Lieberman has given preliminary approval for Israel to join the digital economy taxation plan initiated by the Organization for Economic Cooperation and Development, Financial daily Globes reported last week.
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Lieberman announced his decision at a meeting with senior Finance Ministry officials, ahead of the plan's approval by the OECD on June 30 by ministers of the 139 participating countries.
The new plan calls for a change in the current global corporate tax system to deal with the phenomenon of companies that declare their profits in countries with low tax rates, irrespective of the countries in which they made their profits, and allow governments to collect more taxes from international companies that sell products and services to their citizens.
According to Globes, the plan will affect technological giants like Facebook, Apple, Amazon and Google.
"The economy is becoming more and more global," Lieberman said, "and we need to introduce policy measures in cooperation with other countries. The Finance Ministry will act to ensure that the Israeli economy meets international standards in the various areas, including taxation and the environment, such as with a carbon tax. The new policy outlines will enable the State of Israel to obtain revenue from the giant companies on account of their activity in Israel."
According to the International Monetary Fund, a carbon tax is the most effective way to combat global warming and reduce air pollution. The idea to tax carbon emissions from the burning of fossil fuels has been discussed by the government for many years, but the issue died down due to fears of high electricity bills. Economists argue, however, that not only could tax revenues be returned to consumers via dividends, but a carbon tax would spike massive use of renewable energy.
In addition, Lieberman is considering canceling the exemption from value-added tax on purchases made by Israelis from abroad to a value of up to $75, as part of approving the yearly budget.
Proposals to cancel the VAT were submitted to the government on several occasions but were never implemented. Lieberman's predecessor, Israel Katz, opposed the cancellation of the exemption, but business organizations are persistent in their demands.
Israeli retailers complain that the exemption harms their ability co compete against online retailers abroad, whereas the consumer argument is that it enables people to avoid high prices in Israel. In 2018, the matter even reached the High Court of Justice, in a petition by importers and retailers. The court decided not to intervene.
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