Israel Seeking Ways to Tax Facebook, Google on Ad Profits

Facebook CEO Mark Zuckerberg. (Reuters/Leah Millis)

The Tax Authority is examining ways to impose taxes on the Israel operations of Google and Facebook, and has already undertaken several legal moves in that direction, Globes reported. The Authority has been considering ways of taxing the companies for at least two years.

Both Facebook and Google are incorporated in Ireland, and as a result the companies claim they do not have to pay taxes on revenues earned in Israel. According to the companies, all of the sales associates that earn money directly for the companies in Israel are local agents who work for themselves, and the revenues they bring in cannot be taxed as corporate profits.

Tax Authority officials have been questioning these agents in order to determine the nature of their relationship with the firms, the report said. If the relationship is seen as being more than “advisory,” the Authority is likely to take the companies to court in order to get the taxes it believes it deserves, Globes said.

The report quoted Authority sources as saying that the state is losing out on a great deal of money because of the companies’ positions. Numerous Israeli companies have also complained that the lack of tax payments by the firms constitutes discrimination against them, as they are engaged in businesses that are based on online ad revenues as Google and Facebook are – but earn less because they have to pay taxes.

Several companies have petitioned the High Court on the matter, and the report said that the Authority may do so as well

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