"The Ministry of Finance’s proposed amendment to the Income Tax Ordinance following the foreign currency deregulation both runs counter to the liberalisation trend and voids it of content". This comment came from Uriel Lynn, chairman of the taxation committee of the chambers of commerce federation, following a session of the taxation committee of the economic organisations co-ordination bureau.
The committee was discussing a bill submitted by the Ministry of Finance for the amendment of the Income Tax Ordinance, designed to adapt the Ordinance for foreign currency deregulation.
The committee focused on the discussion of two material features of the bill: taxation of revenues derived from overseas activity, and a requirement as to automatic obligatory reporting on foreign currency activity from and to other countries, transacted via the banking system.
Commenting on the proposal whereby income derived by an Israeli resident in another country should be taxed, Lynn said that where income is non-taxable if derived in Israel, a demand for taxation of similar income by reason of its being derived abroad is out of place. "The proposal would hamper business activity by Israeli residents in other countries, and would be a dis-incentive to transacting business outside Israel. in fact, the opposite approach should be taken, that of not taxing capital gains derived abroad".
Regarding the motion to impose upon the banking system an inclusive reporting duty on all foreign currency movements to and from Israel transacted through it, Lynn said that "beyond seriously infringing privacy, this would constitute a material and harmful change in the character of Israel's banking system. The amendment, if it passes, will make the banking system an automatic source of information on all assessees. This constitutes a change for the worse as against the existing system. The banking system will no longer be able to function as it does today, and will be in a position of inferiority compared to parallel and competing systems world-wide.
Published by Israel's Business Arena June 21, 1998