Kiryat Shmona launches legal battle against the Tax Authority: "The damage is not over"

The Kiryat Shmona municipality is initiating legal proceedings against the State of Israel and the Tax Authority, demanding an extension of the recognition period for indirect damage to the city's businesses. The municipality argues that the economic damage has not yet ended, and that businesses are struggling to recover even after the end of active hostilities. The city's business turnover dropped from 778 million NIS to 589 million NIS, and net VAT fell from 23 million to 12 million NIS. The city's income index dropped by 31 percent, compared to a national average decline of 4 percent. The municipality emphasizes that a business reopening after two years does not continue from where it stopped, but starts anew: without regular customers, without employees, and with debts accumulated while the shutters were closed. The rate of residents returning to the city stands at 55 to 76 percent, so a central segment of customers is simply not there. Added to this is another blow: advances that businesses received in 2023–2024 were used to pay salaries and suppliers, and now demands for their return are taking shape. Business owners who barely make ends meet are being asked to return money already paid to their employees. In June, about thirty-five business owners signed a petition to the municipality asking it to act on their behalf. The municipality sent two documented letters of exhaustion of proceedings, and received no response. The municipality is not a taxpayer, has no compensation claim of its own, and has taken on this struggle solely for the residents and business owners.