excerpted from an editorial in The Jerusalem Post:
Time to cancel uncharitable VAT
One of the most egregious absurdities is that charitable organizations are required to pay value added tax on all of the supplies they purchase. Unlike forprofit businesses, they are not able to offset this expense against VAT collected from from paying customers. VAT paid by charities is an out-of-pocket expense that can’t be recouped; a direct tax, paid to the government, which only increases as their operations – their charitable activities – expand.
For a charity, this 16% additional cost is a highly significant burden, an indefensible constraint on their capacity to do important work.
… On top of this, charities that receive donations of equipment from abroad – medical equipment, computers and the like – also have to pay customs duties on these items.
Just as the government in general, and the defense establishment in particular, expects the billions in annual foreign aid from the United States to arrive every year, tax free and on time, VAT and customs exemptions must be put in place so that charities running soup kitchens in development towns, or helping destitute Holocaust survivors, can spend the maximum amount of their donors’ money helping those in need.
Our legislators know full well that Israel wasn’t founded by bullets and plowshares alone; that behind nearly every unpromising patch of land reclaimed for agriculture, every second-hand assault rifle, and an untold number of welfare projects, stood an earnest donor, and the same remains true today. And few of those donors – be they bar mitzva boys or deep-pocketed machers – has a clue that the cause they have been helping is simultaneously struggling to give the government its unfair share.