Kiryat Shmona Sues Israel Over Business Aid After War

The Kiryat Shmona municipality has initiated legal action against the State of Israel and the Tax Authority, demanding an extension of compensation for indirect damages to local businesses. The lawsuit, spearheaded by Mayor Avichai Stern and the city council, aims to support hundreds of business owners who are struggling after the Tax Authority arbitrarily declared the eligibility for indirect damage compensation ended in February 2025. This decision comes despite the fact that commercial activity in the city has not returned to normal, with many businesses yet to reopen.

The municipality, which is not seeking compensation for itself, emphasizes its commitment to aiding local merchants and residents. Economic data reveals a severe impact on the city, with business turnover dropping from NIS 778 million to NIS 589 million. Net VAT payments decreased by over 45%, from NIS 23 million to NIS 12 million, and the municipal income index fell by 31%, significantly more than the national average decline of 4%.

Compounding the economic hardship, resident return rates to Kiryat Shmona range from only 55% to 76%, leaving business owners without a sufficient customer base, workforce, and burdened by accumulated debts. An additional challenge arises from demands to repay advance compensation payments received in 2023 and 2024, funds that were used for salaries and supplier payments. These businesses now face demands for sums they do not possess.

Following unanswered official inquiries from the municipality regarding the concerns of numerous business owners, Kiryat Shmona is now demanding recognition of ongoing damage from October 7, 2023, until the city fully recovers to its pre-war state. The city clarifies it does not dispute the Tax Authority's right to set deadlines but contests the specific date, which was set without considering Kiryat Shmona's unique situation. Mayor Stern stated, "We didn't ask for a favor, we asked them to look at this city with open eyes and see what's actually happening here. The business owners here held Kiryat Shmona together when everyone else was outside. Now it's our turn to hold them."

If the Tax Authority does not respond favorably within two weeks, the municipality plans to file a petition with the High Court of Justice, including a request for an interim order.