Israeli Tax Authority Employed Opaque Algorithm to Impose Fines, Reportedly Refusing to Provide an Explanation for Amount Calculation to a Farmer

In 2014, the Har Shemesh ranch in Israel's southern Negev desert was fined by the Tax Authority but officials could not explain how the fine amount was calculated, claiming the calculation was done automatically by computer software. When the farm requested the program or source code to examine the formula, the Tax Authority refused. The software was programmed to exercise discretion in imposing fines, deducting tax returns, and imposing financial sanctions without published guidelines. A separate class action lawsuit revealed the same tax software would recalculate VAT payment fines only when the consumer price index went up, not down, with undocumented guidelines that could only be inferred through data gathering. The judge in that case ruled in favor of the plaintiff and ordered compensation of over 2 million shekel. The Tax Authority argued that extracting guidelines from the software would require thousands of programmer work hours and reverse engineering techniques. The case escalated through District Court to Supreme Court, with the Movement for Freedom of Information joining to argue that software constitutes information that must be disclosed for public oversight of government decisions.