Israel has modified its tax policy to ensure that digital multinationals, including Google and Facebook, operating in the country are now required to pay value-added tax of 17%, reports Bloomberg.
In an emailed statement, the Israeli Tax Authority said that, as much of today’s commerce is conducted on the Internet, even a foreign firm with a mainly virtual presence may now be considered a “permanent establishment” and, as a result, subject to tax.
Though the authority did not single out any companies by name as it announced the policy shift, domestic critics had long cited Google and Facebook as Internet firms that were unfairly advantaged compared to local businesses, the Israeli government having failed to fully tax the former.
The new taxes take immediate effect and, according to the authority, will eventually bring in hundreds of millions of shekels annually in state revenue. Though Bloomberg couldn’t immediately reach an Israeli-based Google representative for comment, a Facebook spokeswoman insisted via email that her company “pays taxes according to the law in every country it operates, including Israel”.