Governments look to gain tax revenues from the digital economy

As e-commerce and m-commerce grow, governments are looking to gain tax revenues from the digital economy. Just as a few Indian states have tried, local and national governments find e-commerce as easy pickings for taxation.

Times of India that Israel is to start collecting value added tax (VAT) and income taxes from foreign companies that do substantial business over the Internet in Israel. Under new guidelines issued by the Israel Tax Authority on Monday, foreign companies that operate websites and sell various services such as advertising and brokerage will be subject to 17 percent VAT as well as income tax on their activities in Israel.

Companies expected to be affected include Alphabet's Google, Facebook, Amazon, and Ebay. These and other companies that do a lot of business in Israel will be required to register with authorities as an approved enterprise so that transactions are liable for VAT. Until now, a foreign company's income from providing services in Israel was only subject to tax if it was generated in Israel. A company would be liable for tax only if its activity rendered it a "permanent establishment."

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