Israel to increase taxes on purchases of digital products

Posted On August 8, 2021

Israel is set to increase its taxes on digital purchases of all kinds, including music, books and games, a government source said on Monday, amid concerns over the impact on Israel’s struggling economy.

The taxes would go up to 15 percent from 10 percent, according to the Information and Communication Technology Ministry, a move which comes after the government was criticized for being too lenient with foreign companies in a recent case involving Apple and other companies.

Israel has long been a digital heavy-hitter, with the country’s top two Internet service providers, Tel Aviv-based Ynet and Haifa-based Tel Aviv University, reporting revenue of more than a billion dollars last year, more than half of which came from digital sales.

The government has promised to increase the taxes on all digital goods by 10 percent starting next year, a spokesman for the Information Ministry told The Jerusalem Times.

“In the case of music and books, the taxes will go up from 10 to 15 per cent, and for all other products the increase will be 10 per cent,” the spokesman said.

“This is the first step toward a tax increase that will not only help the economy, but will also reduce the costs for consumers,” he said.

According to the spokesman, the government is looking at ways to ease restrictions on foreign companies operating in the country, including raising the value of their foreign exchange holdings.

“We are looking for ways to reduce restrictions on businesses, which are the mainstay of the Israeli economy, and to encourage the expansion of the industry in order to meet the growing demand for digital products,” he added.

“The current situation is extremely challenging for our country, and the government has to act quickly,” the Ministry spokesman added.

In December, the Ministry of Economy and Industry announced that it would be extending the tax-free period for purchases of foreign-made digital products from one year to five years.

The ministry has previously said it would continue to work with foreign businesses, including Apple and Microsoft, on ways to increase tax exemptions for the country.