Attorney Gil Nadel
The District Court of Be'er Sheva recently ordered the Tax Authority to disclose information regarding other tax-payers to a certain tax-payer who was required to pay a tax debt.
The Tax Authority made a claim for information immunity, but the court determined that in a civil litigation the rule is for disclosure and the exception to that rule is immunity, and in this case the requested information was liable to be vital for establishing the tax-payer's claim.
In this same case, the tax-payer requested information regarding companies who, according to the VAT administrator, issued fictitious invoices to the tax-payer, thereby leading to his tax evaluation.
The case and claims made by the parties:
Four companies- Elhmal Trade and Metals, Logart Systems, Metal Industrial, and Hemed Hameleh, all sold used batteries to Hakurnas, a company dealing with recycling scrap-iron.
Subsequent to an investigation of the Tax Authority, it was concluded that the invoices issued by Hakurnas were fictitious , one of the company CEOs was arrested and thus, Hakurnas was charged with paying taxes on the basis of input taxes that had been previously deducted by them.
It was discovered, among other things, that those same companies had evaded paying taxes at significant rates.
Hakurnas submitted a their opposition but it was deferred., and thus an appeal was submitted to the District Court.
During the course of the court proceedings, Hakurnas demanded that the Tax Authority disclose information to them regarding those four companies, including period reports that were submitted to the authorities, their addresses, the opening and closing dates of these companies, information regarding their representatives and more.
Hakurnas claimed that the Tax Authority had been negligent in that they had possessed all this information regarding these companies for quite some time and so, they could have notices such a high level of tax evasion, which should have, in turn, aroused their suspicions. Hakurnas claimed that the information they are requesting in this proceeding was meant to support these claims.
The Tax Authority refused to hand over the materials, and claimed that this is sensitive business information of the four companies and is therefore subject to immunity.
Court ruling:
The court ruled that in this case, the information requested by Hakurnas, although pertaining to other tax-payers, is directly relevant to the tax evaluation being carried out in court.
The court noted that the evaluation was carried out due to illegal deductions of input taxes that resulted from fictitious invoices which were issued by those same companies, and thus, the relevancy of the information to this case was proven.
The court referred back to ruling from the case of D.N.D. [ permission for civil appeal 291/99 D.N.D. Jerusalem Stone Supply vs. VAT adminisrator], where it was decided that the tax-payer's right to peruse documents held by an Authority, and which constitute the basis for that Authority's decision, is a basic right.
Therefore, the court deferred the claim for immunity, and ordered the Tax Authority to transfer the materials to Hakurnas, criticizing the Tax Authority's stance in these words:
"Approving the position of the responder (the Tax Authority- G.N.) would mean that the requester (the tax-payer- G.N.) would be forced to defend themselves blindfolded and bound and this is surely a cynical and inappropriate abuse of the legislature's words, which I believe were not meant to allow for immunity in such an instance".
[Tax appeal (Be'er Sheva District Court) 16219-03-12 Hakurnas Metal Factory Ltd. vs the State of Israel, Judge Nehama Netzer, decision of October 7, 2012. Pary representatives- on behalf of the tax-payer, Hakurnas- Attorney Y. Castel. On behalf of the State- Attorney Y. Panshi of the southern district State Attorney- civil].
Notes:
The right to view documents held by an administrative authority and which were used as the basis for a decision is a basic right.
The right of viewing is even central to criminal proceedings. According to the provisions of criminal law, when an indictment is submitted, the prosecuting authority must disclose to the accused all the materials of investigation that may be relevant to his case, directly or indirectly, often even if this may possibly pose a threat to state security [Misc. requests in criminal matters 4857/05 Tali Fahima vs. the State of Israel].
And yet, the court will not accept every request made by a litigant to view documents pertaining to their case, even in a criminal proceeding. For instance, in one criminal proceeding which was conducted in the Magistrate's Court of Ashdod two years ago against a scooter importer, the court deferred the importer's request to view materials which were in possession of the Customs Authority regarding other scooter importers who are active in Israel. The importer claimed that he was in need of those materials in order to prove that the Customs Authority subjected him to a policy of fastidious enforcement and in order to cast doubt upon the credibility of some of the prosecution's witnesses in this trial. In this case the court deferred the request and did not permit the importer to view the requested materials. [Criminal record (Ashdod) 48010-02-10, the State of Israel vs. Bayer].
In the recent past, an importer's request during a civil proceeding to obtain a large quantity of material held by the authorities was granted. The material was pertaining to the import of goods [Misc. requests in civil matters (Jerusalem) 1632/06 Pharma Guri vs. the State of Israel], but the decision was cut back in the Supreme Court [Civil appeal permit 10144/06 The State of Israel vs Pharma Guri], and there it was agrred that the tax-payer would receive information regarding the categorization of products by other importers. In another case, an importer requested information regarding other importers but his request was deferred [Civil suit (Rishon Le'Zion Magistrates Court) 1907/09 Afcon Control and Automation Ltd. vs. the State of Israel- the departments of Customs and VAT] giving precedence to the right of immunity.
We assume that in the present
Hakurnas case the court preferred the tax-payer's right to receive the data and deferred the claim for immunity, because in the theoretical level it was proven that this data was extremely relevant, as per the plea, to the cause of the tax-evaluation.
עדכוני מכס ורגולציה
