A taxpayer’s appeal against tax assessments was dismissed by the District Court, with the result that the taxpayer’s tax liability to the Israel Tax Authority became a final judgment debt.
The taxpayer subsequently filed an appeal with the Supreme Court.
First question: Is the Israel Tax Authority entitled to commence collection proceedings under the Taxes (Collection) Ordinance in respect of the tax debt that is the subject of the judgment?
Second question: If the Israel Tax Authority has imposed liens on the taxpayer’s assets in respect of the tax debt, is it possible to have those liens cancelled?
These questions were considered in an application for interim relief in Civil Appeal 3022/17, Zion Mizrahi v. Director of VAT, Haifa (the “Mizrahi case”).
With respect to the first question, the Court held that a successful litigant is entitled to enjoy the fruits of its judgment.
As a general rule, the filing of an appeal does not, in itself, stay the enforcement of a judgment.
Accordingly, the Israel Tax Authority was entitled to initiate enforcement proceedings in order to collect the tax debt awarded in its favor.
With respect to the second question, the Court held that there are circumstances in which enforcement of a judgment should be stayed, thereby suspending the collection of the tax debt until the appeal has been determined.
A stay of execution may be granted after considering two questions:
(A) Does the appeal have a reasonable prospect of success?
(B) Does the balance of convenience favor the applicant seeking interim relief?
The scope of any stay of execution depends on the strength of the answers to these two questions.
In the Mizrahi case, without expressing a definitive view regarding the prospects of the appeal, the Court ordered the cancellation of the lien imposed on the taxpayer’s bank account, based on the balance of convenience.
At the same time, all other liens imposed on the taxpayer’s assets remained in force.
