Lahav Israel Association of the Self-Employed president Yehuda Talmon has won an unprecedented victory against the Ministry of Finance, when the High Court of Justice ruled in Lahav's favor on recognizing meals expenses of the self-employed. The court ruled that an ongoing error in the updating of these expenses by the Israel Tax Authority resulted in overpayments in taxes, and ordered a refund to the self-employed, which will total NIS 700 million.
The High Court of Justice ordered Minister of Finance Yuval Steinitz to authorize an update of the maximum deductions for meals expenses backdated to March 1, 2009, when Lahav filed its petition, through January 1, 2011 (when the Ministry of Finance cancelled the regulation) and allow the deduction pursuant to the regulation before it was cancelled.
The amount of meals expenses has not been updated since 1985. Lahav calculated Israel's inflation rate since then is 1,385%, and asked the Ministry of Finance to raise the meals expenses ceiling from NIS 7 per day to NIS 70. The ministry refused, and then cancelled all tax deductions for meals.
In response, Lahav petitioned the High Court of Justice to order the meals expenses revised retroactively to NIS 70 per day for 2009-11, and order the Ministry of Finance to refund self-employed taxpayers.
The Tax Authority's statement of response said that the request would cost the state NIS 400 million a year in lost tax revenues. Since the petition covers seven quarters, the total refund will amount to NIS 700 million.
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