Gov't seeks to reduce cash transactions

The cabinet has set up a team to propose ideas in the war against black money and tax evasion.

The cabinet today unanimously approved the establishment of a team, to be chaired by Prime Minister's Office director general Harel Locker, to draw up a policy for the reduction and restriction of the use of cash as a means of payment. The team will submit its recommendations to Prime Minister Benjamin Netanyahu within 90 days.

The team is part of Netanyahu's initiative to expand the war against black money and tax evasion. The team will summon interested parties to examine the consequences of reduction of the use of cash, and it will examine solutions to help the public carry out daily transactions in which cash is replaced by fee-less electronic charge cards. These are cash charged cards, which unlike credit cards, will be available for the poor, welfare recipients, and people without bank accounts.

The team will also consult with cyber experts to assess the payments systems' vulnerability to hacking.

The Prime Minister's Office said today that by adopting the new alternatives to cash, Israel would lead a breakthrough and offer a response to the cash-based underground economy. "It is estimated that billions of shekels in the economy are not taxed, which means that the public does not benefit from them," said Locker. "The team will find innovative and logical solutions to correct the situation, and will submit a plan to the government for approval."

The police also supports the cash alternatives as a means of dealing with money laundering, and criminals' use of cash to finance crime.

Data presented to a cabinet meeting stated that NIS 55 billion in cash was circulating in Israel at the end of 2012. NIS 49 billion was held by the public and NIS 6 billion was held by the banks. The amount of cash in the economy has increased more rapidly in recent years than Israel's natural population growth.

Locker's team will also discuss restricting the use of checks, capping cash transactions, and the sharing of information between the Tax Authority and the Authority for the Prohibition of Money Laundering. A sub-committee of top Bank of Israel officials will examine ways to encourage the public to use electronic cards instead of cash.

A Bank of Israel official said during the meeting that the general public was open to the use of electronic payments.

Locker's team will include the Israel Police Commissioner Yohanan Danino, Israel Tax Authority director general Moshe Asher, the director of the Israel Money Laundering and Terror Financing Prohibition Authority, the Bank of Israel's director payments and clearing systems, Attorney General Yehuda Weinstein, and deputy state prosecutors.

A recent study by the Prime Minister's Office found that European countries, such as France, Italy, Spain, Belgium, and Bulgaria, have already taken measures to cap cash transactions. The US requires reporting to the authorities all cash transactions exceeding $10,000. The EU Third Anti-Money Laundering Directive requires reporting cash transactions on certain commodities deal over €15,000. The EU Fourth Anti-Money Laundering Directive halved the cap to €7,500, on the grounds that the earlier cap was too high.

Small businesses object

Even before the government's approval of the team, small businesses have spoken out against it. "Will plumbers or tutors from now on carry around card clearing machines?" asked Association of the Self Employed and Businesses in Israel (Lahav) president Ehud Ratzabi "Globes". "I fear that this measure will reduce the turnover of small and mid-sized businesses. It would be better for the government to focus its efforts on money laundering, which is truly extensive. I welcome the war against money laundering, which is a holy war, but most black money is not found in small businesses."

Ratzabi said that Locker should include in his team representatives who are experts in the daily trials and tribulations of small and mid-sized businesses. "With all due respect to the top civil servants, none of them live in the field," he said. "Even the most talented official at the Ministry of Finance ultimately grew up in the ministry, and was never exposed to the daily struggles and difficulties of a small business owner in Israel. It would be a good idea if, before the team makes its recommendations, it includes Lahav representatives, who come from the field and are alert to the significance of such measures."

Published by Globes [online], Israel business news - www.globes-online.com - on September 17, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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