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Critics: 'A death sentence to businesses'

Tax Authority to demand return of hundreds of millions in coronavirus stipends

Hundreds of small companies and thousands of independent workers reportedly received grants totalling $300 million they had not qualified for; will now be forced to give money back

View of the closed Hadar shopping mall in Jerusalem on October 12, 2020 (Olivier Fitoussi/FLASH90)
View of the closed Hadar shopping mall in Jerusalem on October 12, 2020 (Olivier Fitoussi/FLASH90)

The Tax Authority plans to demand the return of hundreds of millions of shekels it doled out to small businesses and independent workers to help them weather the coronavirus crisis, according to Hebrew media reports.

Dozens of businesses on Tuesday received letters from the Tax Authority and hundreds more were expected to be sent out in the coming days. Thousands of independent workers were also expected to be faced with returning the assistance, According to Channel 13 TV news and the Globes paper.

Channel 13 said the amount of “overpaid” grants could amount to up to NIS 1 billion ($295 million.)

The Tax Authority was also setting up a special website to facilitate the return of the money, which it says was mistakenly claimed under an initial system designed to get help out quickly.

Many small businesses have suffered critical damage due to the pandemic, and government restrictions on the public have led many to remain closed for long months, with business owners depending on grants and unemployment benefits to survive — or seeking new jobs to make ends meet.

The government currently hands out periodic grants to businesses that have been hit by the pandemic and the limitations it has entailed. These include general grants every two months, derived from the business’s reported earnings during the same period last year (and dependant on a drop of at least 25 percent in revenue); as well as grants for wasted business expenses (rent for premises, etc).

Closed down restaurants at Tel Aviv’s Sarona market, October 15, 2020 (Miriam Alster/FLASH90)

The Tax Authority’s request for a return of funds related to those second grants. It said in some cases, businesses’ reports showed their expenses had not justified the sum received from the government.

On its website, the Tax Authority warns applicants for the grants that they must meet certain criteria, or they may eventually be required to return the aid sums they’ve received.

Channel 13 said many may have mistakenly ticked one or two boxes on the forms, not dealing they were not eligible. It also noted that the sums, ranging from a few thousand shekels for independents to hundreds of thousands for some companies, would most likely have already been spent as they tried to weather the extended crisis.

Revital Siton Ben Ari, Vice President of the Institute of Tax Consultants, told Channel 13 the decision did not appear to have been made according to the criteria on the website, however, nor had it been made clear in advance to tax consultants advising those businesses.

“Businesses are bleeding out,” she said. “To demand that they retroactively repay tens of thousands of shekels due to instructions that were not published anywhere, or provided to the professionals, is a death sentence to businesses.”

People walk next to closed shops in downtown Jerusalem on September 30, 2020 (Nati Shohat/Flash90)

Facing complaints, the Tax Authority told Channel 13 that only businesses that were found to have failed to qualify for the grants were asked to return the money. It emphasized that business owners were allowed to appeal the decisions in their case, and claimed only some 5% of businesses were found not to comply with criteria.

The Tax Authority also said it would set up a new page on its website dedicated to allowing business owners to easily return funds should they realize — or be told — that they do not meet the criteria for them.

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