For a business to be charged taxes, it has to make money – and in 2018, 60% of all businesses in Israel ended up not paying taxes, because they didn’t make any money, statistics show. According to a report by the Tax Authority, 2,010 of the strongest companies in the economy pay 92% of corporate and business taxes collected by the government. Those companies paid NIS 38.6 billion of the total NIS 43 billion collected in corporate taxes in 2018, the study showed.
The corporate tax rate in Israel is a flat 23% of revenue, but it is only the third most important source of income for the government. The biggest profit-making tax for the government is Value Added (sales) Tax, which slaps a 17% tax on nearly all products and services. Following that is individual income tax. Corporate tax is responsible for just 13.4% of all taxes collected.
Most corporate tax returns are not reviewed or audited – but those that are generally result in a higher tax assessment. In 2019 tax officials reviewed 25,000 corporate tax reports that were filed in 2014, 18,000 filed in 2015, and 12,000 filed in 2016 – netting the government up to NIS 3.8 billion more. With that, a mere 13% of all reports are reviewed or audited, with just a 4% chance that a company will be charged more taxes, the report said.