Business in Brief

Government pressing to close loophole in law giving exporters tax benefits

The government asked the Knesset over the weekend to pass a bill before the January 22 election to close a loophole in a law intended to give tax concessions to exporters. The loophole has been exploited by companies whose business is largely in Israel and the Palestinian Authority.

According to the Finance Ministry, if the law is not passed immediately, the state stands to lose hundreds of millions of shekels in revenue this year, perhaps as much as NIS 1 billion.

The loophole came about because the export benefits were defined as available to companies selling to markets of at least 12 million inhabitants. Israel's population is under 8 million, but some companies obtained legal opinions interpreting Israel and the population of the Palestinian Authority as a single market of over 12 million people.

The amendment would raise the threshold to markets of more than 14 million people. The Tax Authority, however, says the legal opinions are mistaken and announced last month that it would take action against companies improperly claiming the reduced tax rate.

The Knesset has made it a policy not to pass laws during its recess before the election unless the legislation is urgent, but because of the financial implications, the new law is expected to pass. (Zvi Zrahiya )

Cellcom to refund some Web fees in class-action settlement

Cellcom will provide a 50% refund to customers who bought a third-generation cell phone as part of an Internet package but did not use the 3D services. The compensation was worked out last week in the settlement of a class-action suit filed against the company in the Tel Aviv District Court. Based on initial estimates, about 61,000 customers could be eligible for the refund. Third-generation cell phones usually operate on networks with faster speeds and greater capacity than previous technology. The class-action suit arose out of a 2007 suit filed by Razgal Energy, a Cellcom customer that claimed that the customers who buy a third-generation cell phone from the company are forced to pay a monthly fee for Internet access.

Cellcom says owners of third-generation phones still receive faster connections for data downloads, regardless of whether they use the Internet. The customer is paying for all these third-generation services, not just Internet access, Cellcom says. After protracted negotiations, the parties agreed to a settlement under which Cellcom will refund half the amount customers paid for Internet packages between July 2006 and July 2008, when Cellcom changed its billing formula. In the deal, the customer can't have used the third-generation services required for Internet access - or at least their use should have been negligible. Based on preliminary data from Cellcom, the company might have to pay out as much as NIS 3.8 million in refunds. (Yasmin Gueta)