Israel's car leasing cos suspected of tax evasion

Shlomo Sixt
Shlomo Sixt

The Israel Tax Authority has been conducting a wide-ranging undercover investigation in the auto and leasing sectors.

The Israel Tax Authority has been conducting a wide-ranging undercover investigation in the auto and leasing sectors, sources inform “Globes”.

The allegations being investigated revolve around tax evasion totaling up to hundreds of millions of shekels, potentially by several car and leasing companies, mainly the leaders in the domestic market, including public companies.

Based on the information provided to “Globes”, one of the central allegations involve the evasion of sales tax and income tax through false classification of income from selling insurance as an expense refund to clients instead of taxable income while omitting the income from its reports to the Tax Authority.

The topic recently came up in a request for a class action suit filed by the Naor-Gersht law offices against the Shlomo Sixt group parent company Shlomo Holdings and its subsidiaries Shlomo Fleet Management, Shlomo Auto, and Shlomo Insurance.

According to the information provided to “Globes”, other leading companies are suspected of other violations, including money laundering.

The Tax Authority had filed a document with privileged information regarding the case to the court and it was designated as classified in the file. However, following a temporary malfunction in the “Court Net” system, the document became briefly available and its contents were revealed to various sources in the auto industry, including executives at companies that may be part of the probe.

Thus, some of the very people which the investigation hoped to catch off guard have been aware of the probe for several weeks. Meanwhile, the Tax Authority was convinced it was conducting a secretive investigation, with the intention of springing a surprise for the companies when the query entered its public phase.

The Tax Authority refused to comment on the report.

Expense or income

The allegation in the proposed class action suit against Shlomo Sixt claims the companies within the group overcharged their clients by hundreds of shekels for compulsory auto insurance while falsely telling their customers they were being charged for “insurance expense refunds”. The insurer in all the noted cases was Shlomo Insurance from the Shlomo Group.

The company which filed the motion is Polar Energy Systems. Polar had paid Shlomo Sixt for leasing services on behalf of its employees and retroactively discovered, it claims, that it was wrongfully charged NIS 450 out of insurance fees of NIS 1,700 per vehicle.

Polar claims, “The Shlomo Group piled artificial expenses on its clients, and with this inferior tactic the group made dozens of millions of shekels per year off its clients.”

In a brief filed with the request for the suit, it was estimated the hidden premiums the Shlomo group allegedly charged its clients totaled NIS 125 million in the years 2008-2011. If that sum is taxable, the scope of the alleged tax evasion by Shlomo Sixt for 2008-2011 may reach NIS 55 million (not including any potential fines); the scope of the entire investigation which includes several other companies is expected to reach hundreds of millions of shekels.

The Tax Authority said: “We do not generally address questions over investigations of the authority and our response does not attest to the existence of any such investigation.”

Published by Globes [online], Israel business news - www.globes-online.com - on February 5, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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