(but the reasons raise questions)
Gil Nadel, Adv.
Recently, the Magistrate's Court of Tel Aviv issued another decision discussing the question the 'rolling over' of duties by the importer (paragraph 6 to the Law of Indirect Taxes) (תא 47001/01 Kivunim Systems v. State of Israel, decision given 6.9.07; for the importer- Adv. Avigdory, for the State- Adv. Lis of the District Attorney's office of Tel Aviv.)
Right at the beginning, we will note that the decision ruled that the importer did not prove that the tax was not rolled over onto the consumers. And this is not the first time that this has been ruled by the court, but in circumstances of the case before us, the rationales given by the court seem extraordinary, irrelevant to the decision. We will check the arguments of the sides and afterwards the reasons for the decision in a way that will illustrate our point.
At a certain point in time, in the year 2000 and 2001, the purchase tax amount was raised on slide projectors integrated into video computers. As you know, any writ levying or increasing the amount of a duty or a purchase tax needs to receive approval from the Finance Committee of the K'nesset. However, this approval was not given for this writ and instead a new writ was installed by the Minister of the Treasury. The importer of projectors paid the tax under protest and filed suit for its return, in light of the nullification of the original writ.
In fact, regarding a certain period of time, there was no disagreement between the sides about the nullification of the writ, that is, that the importer did indeed overpay taxes. The question that needed to be decided was whether the importer included the tax in the sales price to the buyers ("rolled over the tax") or not.
The importer claimed that it took upon itself the strategic decision not to raise prices until the tax had been finally approved by the Finance Committee, so as not to cause a decrease in its dominant market share. The importer explained that this is a competitive product, whose price is influenced by supply and demand, and also that the prices of competitors in the market are low, apparently due to sale of products that were released by the Customs Authority before the tax was levied. Therefore the importer decided to absorb the tax and did not roll it over onto the consumer, although it was expected that this would pull the company into losses for some time.
The importer filed an opinion of an accountant that established that the importer did not roll the tax costs onto the consumer but rather absorbed them itself and therefore it suffered losses. The importer even filed an opinion of an economic that followed a similar line.
The Customs Authority, on the other hand, claimed that the importer should have turned to the customs manager for a refund of the tax before turning to the court.
The Customs Authority also claimed that for the purpose of checking whether the tax was rolled over, one must know the importer pricing policy before the tax was levied in comparison to its pricing policy thereafter. In the absence of data about the sales before the excess was paid and after the period in which is was paid, nothing can be concluded from the sales of the importer during the period in which the excess was paid, it claimed, about the policy regarding rolling over prices.
The expert for the Customs Authority also established that the sum of administrative and general expenses during the period relevant to the suit was especially high, both in light of what is customary in other companies and in light of the data of the importer one year before that. Had the importer kept his administrative and general expenses to the level that they had been the year before, it would have had a very high net profit, despite the tax payments.
Thus far the arguments of the sides, and now the decision of the court.
The court did not accept the importer's version according to which it did not know about the raise in taxes ahead of time and did not prepare a "stock", even a partial one, of projectors. The court ruled that it is not logical that the importer would be prepared to accept so great a financial danger and not roll over a cent onto the consumers. The court also ruled that the claim borders on a lack of good faith.
The court explained that even if the importer were sure that all the tax payments would be returned to it, at one time or another, financial logic demands that it scatter the damage and partially roll the tax onto the customers.
The court noted that the importer's manager did not apply to the customs manager even once requesting a refund of the taxes, and even though there are not clear instructions in the above law that such an application is a precondition to application to the courts, logic indicates that it should be.
Accordingly, the court ruled that the importer did not prove that it did not roll the tax over onto the consumer and the case should be dismissed.
As we claimed at the beginning of the article, the court's reasoning seems astonishing, and irrelevant to the conclusion. First of all, the decision does not analyze the conflicting economic opinions, something which seems elementary and which is done in other decisions that discuss rolling over taxes. It would have been right to compare the importer's stance regarding its losses with the Custom Authority's stance that claimed higher administrative and general costs.
Secondly, it is hard to accept the stance according to which an importer who chooses not to roll over the tax acts in a way that border on lack of good faith. It's true that there are implications to failing to scatter the damage and taking a high risk, but there are additional factors in the commercial field, like market share, being on the shelves, etc. Fundamentally invalidating this behavior seems to us incorrect.
Thirdly- what's the connection between the procedural argument of failure to turn to the manager ahead of time and the proof of lack of rolling over? And on the contrary, the decision that the court mentions rules that there is not obligation to turn to the manager ahead of time.
As a side point, we will not that there is still not clear decision on the question of whether the refund of an illegal tax is also subject to proof of failure to roll over. In the past, there have been incidental comments in the decisions of the lower courts that established that a tax like this is not subject to proof of failure to roll over. In the decision before us the approach, of course, is the opposite.
|
עדכוני מכס ורגולציה
