As part of its upcoming state budget, the Finance Ministry plans to enact a bill that would require Israel’s 17% Value Added Tax (VAT) from foreign digital service providers such as streaming platforms Netflix, Spotify, Apple Music and Disney+, as well as tools such as the Adobe software suite, VPNs and cloud storage platforms.
Though it’s the providers themselves who would be obligated to pay the added VAT, it’s likely that the move will result in higher subscription fees to consumers, as the companies would have little reason not to pass the fee on to those purchasing their services instead of swallowing the cost themselves.
The tax aims to prevent discrimination
The so-called “Netflix Tax,” claimed the Finance Ministry, is intended "to prevent discrimination between Israeli businesses and foreign businesses.”
“It is proposed, in accordance with the OECD recommendations, to apply a VAT payment obligation to companies whose domicile is not in Israel for the sale of digital services to Israeli consumers,” stated the Ministry. “Digital services include online buying of products such as streaming services… music players and games. Most of the companies that provide these services are international companies.”
According to the Ministry’s estimates, the additional tax would generate around NIS 500 million per year for government use.
HaCohen also brushed away concerns that the bill will result in higher costs for end users, suggesting that “International corporations are expected to absorb this increase and not impose it on consumers.”