Israeli banks prepare for int'l tax evasion laws

Customers are withdrawing money from Israeli banks as the UK, France, and Canada mull laws similar to the US's FATCA.

Israeli banks are readying for stronger regulation in Europe to prevent tax evasion. Sources inform "Globes" that some banks have recently toughened their attitude to customers that hold citizenship in European countries. Banks are also investigating why some customers insist on not receiving mail from them, out of concern that they want no evidence that they hold bank accounts in Israel.

The suspiciousness with which the banks are behaving towards European customers stems from concern that European countries such as France, Germany and the UK are about to push ahead with aggressive legislation on tax evasion that would require the banks to take steps against their customers. Some Israeli banks (mainly the larger ones) prefer to prepare medicine in advance ahead of the illness, and reduce activities with European customers.

Legislation on the issue of tax evasion has already been enacted in the US and it will come into effect in June 2014. The US Foreign Account Tax Compliance Act (FATCA) requires financial institutions worldwide to report on accounts and assets that they manage for US citizens in order to collect taxes even if they are not domiciled in the US.

This is a draconian law that requires major preparation by banks worldwide including in Israel. The banks needed to locate all their customers that have US citizenship, sign them up on the appropriate forms, and pass them on to the US authorities, and where necessary deduct 30% tax at source. The accompanying result of FATCA is the outflow of capital from Israeli banks. "Globes" estimated three months ago that US customers had withdrawn close to $5 billion from Israeli banks. Some has been used to buy real estate while other sums have been moved to banks overseas.

Israeli banks say that European customers are beginning to withdraw their money from banks but at this stage still in small amounts, and not on the scale of US customers.

This is all part of a worldwide trend to invest major resources in the war against tax evasion and money laundering as countries need to find more money to cover growing deficits.

The US is leading these efforts through FATCA with the Western Europeans likely to follow suit and Canada also preparing legislation.

Published by Globes [online], Israel business news - - on October 6, 2013

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

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