In recent years companies have flourished that offer accessible online services for receiving tax rebates. Within minutes a form can be filled in and then the company does the work with the Israel Tax Authority and tells the client how much of a rebate they can expect. Of course this work is performed for a fee but now the Tax Authority has decided to play tough with these companies.
In December the Tax Authority, headed by Eran Yaacov, published a form that salaried employees must fill in when giving power of attorney to these companies. Then, according to these companies, the Tax Authority began blocking access of accountants and tax advisors working with these companies, without any prior notice.
In addition, representatives of these companies were summoned to a hearing in the Tax Authority offices. During the hearings, charges were made against them for breaching the contract for the use of the computer system and prohibited use of bots. Accountants and tax advisors who have undergone this "intimidating" experience have spoken to "Globes."
One of them is A, an accountant specializing in taxation and representing self-employed and salaried clients before the Tax Authority. "It was aggressive. I came to work and fed in my user details in order to begin working in the system and I discovered that I was blocked. I didn't know if it was a technical problem or the computer had been hacked."
SHAAM, the Tax Authority's automated computer processing service, told A, "We have blocked you. We will get back to you." After a short while A received an email that said, "We have disconnected your office due to suspicions of violating the terms of engagement." The letters to these representatives was signed by Niva Mashiach, head of SHAAM's customer service authority department.
After the warning letter came the "discussions" or "hearing" to which the representatives were summoned. A recounts, "I didn't bring a lawyer because I didn't think there was any need. When I arrived I found myself under attack. They told me that I was using bots and jeopardizing the system, and that I was helping the Iranians. It was really just like that."
A was being confronted by a panel of four to five representatives of the Tax Authority and SHAAM including Shlomo Ohayon, deputy director general customer services of the Tax Authority and Niva Mashiach.
At the end of the hearing, A asked to know what he could change so that he would again have to the Tax Authority computer system, and he pointed out that he would no longer use bots and no longer work with tax rebate companies. In response he was told that it wouldn't help and, "We will inform you if access will be opened for you."
A legal sources familiar with the issue explains that blocking access to the system ruins the lives of these representatives. "At this point, the world falls apart for a person like this. He has 1,000 people in the system that he is handling."
A's access to the system is still blocked and he is waiting for them to get back to him. "I have clients that aren't related to tax rebates, the self-employed who need to report and file income tax payments and I cannot provide them with services. In one go they have cut off my livelihood."
Over NIS 1 billion in annual excess tax collection
Applying for income tax rebates is perceived as complicated by salaried employees. In October 2021, the State Comptroller issued a hard-hitting report on the conduct of the Tax Authority concerning income tax rebates to the public. The report found that the Tax Authority over-collects about NIS 1 billion annually in taxes from the public and that between 2016 and 2019 an estimated excess of about NIS 3.6 billion was collected.
In this situation, an entire industry grew to help salaried employees retrieve the taxes they were owed by filing requests with tax rebate companies. These companies use technologies that gather data quickly, saving the time of a manual search.
The claim: Concerns about endangering cybersecurity and ethical violations
One of the tax rebate company owners says, "Today everybody uses technology to streamline the work. The Tax Authority calls this using bots but these systems are secure and legal. Much of an accountant's work is very Sisyphean and there are all sorts of programs that do this with a stroke on the keyboard instead."
The company owner says that the Tax Authority does not block bots related to paying revenue to the state but only those applying for rebates. "These bots works via two online channels - the first for tax rebates and the second for reporting by the self-employed that brings the state revenues. Not only did they not stop the bots that are related to bringing money into the state, they give them tacit consent."
Beyond the cybersecurity risks, representatives working with the tax rebate companies have been warned that such work violates the code of ethics of certified public accountants (CPAs) because CPAs are not allowed to work with someone who is not a CPA and share fees with them. A tax rebate company source says, "The bottom line is that the client contacts a licensed person because all tax rebate companies work with a tax consultant or an accountant. What does it matter if the client works through a company that uses an accountant?"
It is also questionable whether it is the Tax Authority's job to enforce accountants' ethics or whether it should be left it to the Institute of Certified Public Accountants. The problem, claim sources that have been blocked by the Tax Authority, is that the Tax Authority is trampling on the rights of the representatives.
"If there is proof that a certain company has stolen money then investigate them but that is not what they are doing. They are conducting a campaign of intimidation against an entire market," one source claims.
A legal source familiar with the issue told "Globes," "There are currently only a small number of cases of representatives to which this has happened but it is a slippery slope that is irksome. What will be the next stage? Who will be blocked next without being notified in advance?"
In the field, the measures being taken by the Tax Authority against tax rebate companies are beginning to be felt. Those entering the website of Fibotax, which until recently offered a "digital service for tax rebates," were met by the following message: "Unfortunately, registration is currently closed for new customers." The explannation "In recent months, the Tax Authority has been working to prevent technology companies like Fibo from continuing to help people get their money back."
Fibo told "Globes," "Unfortunately, after a struggle of several months we have no choice but to change direction. The Tax Authority is not ready for the technological developments that exist today in every other field. Fibo will continue to provide service to existing and new customers through collaboration with another company."
Tax Authority response: "The Tax Authority places great importance in exercising the rights of those entitled to a tax rebate and is doing a great deal to strengthen the realization of those rights. The examination is still being conducting by the authority and so we cannot comment on its findings. We will add the subject of cutting off representatives."
Published by Globes, Israel business news - en.globes.co.il - on March 23, 2023.
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