New VAT Rules – Why This Is Bad News for Business Owners

The Israel Tax Authority is planning a VAT reform that would require businesses to remit tax immediately upon receiving payment. Expert Ariel Petel warns of devastating consequences for small and medium businesses, stripping them of working capital and increasing state control. He criticizes the one-sidedness of the system and proposes modernizing tax platforms.

The Israel Tax Authority is preparing a reform that will change the order of VAT payment: businesses will have to remit the tax immediately after receiving payment from a client, rather than waiting for the accountant's scheduled report. Expert Ariel Petel, whose analysis was published in Sponser, calls this decision devastating for the economy. According to him, businesses will lose the financial buffer that allowed them to use these funds in circulation for a month to a month and a half. This money goes to salaries, rent, and payments to suppliers. The state, in the expert's opinion, does not offer a prompt VAT refund on business expenses, and its digital platforms are unstable. Petel believes the reform increases control over businesses that already operate under strict regulation and high credit costs. He calls instead for modernizing the tax authority's systems. The article does not include official comments or data, relying solely on the expert's opinion.