Own several homes? Frequent flyer? The Tax Authority's after you

Moshe Asher, Shlomit Wagman  Tamar Matsafi

Israel Tax Authority chief Moshe Asher says letters to people with suspicious activity have so far yielded NIS 650 million in tax.

"Today more than ever the public in Israel understands the significance of the connection between the struggle for social justice and a more equal sharing of the tax burden in the country, a more just distribution of wealth, and living in a properly run country. Everyone understands that if the Tax Authority does not manage to collect taxes in a more equal and just fashion, salaried workers and people who have no possibility of evading tax will pay more and bear a heavier burden. More effective collection allows the government to give more to the citizen. Therefore we now have a complete holistic operation in the fight against black capital." Thus Tax Authority director Moshe Asher opened the panel "The Fight Against Black Capital" at the annual conference of the Institute of Certified Public Accountants in Israel taking place in Eilat.

Black capital is estimated to amount to 20% of Israel's GDP. Asher and Dr. Shlomit Wagman-Ratner, head of the Money Laundering and Terror Financing Prohibition Authority in the Ministry of Justice, reviewed the international and local campaign against black capital, and made clear that the era of tax shelters and banking secrecy was over.

"Banking secrecy is largely dead," said Wagman-Ratner, "Switzerland is the outstanding example of this, but you see it all over the world. In money laundering, there has been cooperation and substantial exchange of information for years."

Asher commented on steps taken by the Tax Authority in recent years to deepen collection and to combat black capital, among other things expanding the number of people filing tax returns by sending over 118,000 letters to people concerning whom there were warning signs that they were not reporting income, such as ownership of several homes, frequent overseas travel, and so forth.

"The tax collected as a result of this action already amounts to over NIS 650 million, but, more importantly, the people who had not reported up to now are in the net. Every so often we will send another wave of letters, and at the same time we will engage in enforcement. Where necessary, we will put people under criminal investigation. Another wave of letters is now in the pipeline."

Asher went on to say that the Israel Tax Authority was at the spearhead of international efforts against black capital and to harness the banks to the campaign. "We decided to exploit this to the full. I myself travelled to Switzerland, and explained our aims to bankers there, and I'm happy that the Swiss banks are cooperating. They approached their customers and told them, 'Unless you bring us confirmation from the Tax Authority that your money is reported and not tainted by money laundering, we will close your activity with us.'" Asher said that thanks to the action it had taken, by the end of May the Tax Authority had collected NIS 2.7 billion more than the tax collection forecast. Asked by the panel moderator, journalist and presenter Gadi Sukenik, whether this meant we would see tax cuts, Asher replied, "I'd be very glad for that to happen and so would the minister of finance and the prime minister."

Wagman-Ratner spoke about the inclusion of taxation offences in the Prohibition on Money Laundering Law as part of the war on black capital. "The important thing is that we will be able to forward information to the Tax Authority. We have information on tax evasion to the tune of about NIS 1 billion a year. Up to now we could not share this information with the Tax Authority, and now we will be able to do so."

The panel also commented on the raid carried out by the Tax Authority recently on the offices of three companies and at law firms that provide to Israelis company formation services in tax shelters around the world. The Tax Authority demanded full information about the Israeli clients. Last week, the court ruled that the Tax Authority was entitled to demand from lawyers the lists of their clients to whom they had provided offshore company formation services, and that lawyer-client privilege did not apply to these documents. Advocate and CPA Jack Blanga attacked the ruling and the approach of the Tax Authority, saying that it saw law and accountancy firms as a source of information on their clients. "Lawyers and accountants are treated as the weak link, and the Authority and the state find it easy to attack this weak link. The removal of lawyer-client privilege, as happened in the court last week, is a very serious matter," he said.

Asher responded by saying, "As soon as an accountant discovers that his client has deceived him, and the income isn't the income and the expenses aren't expenses, he is obliged to resign and not file the return for the client. Otherwise he submits his license along with that return. That is how he has to behave. He certainly cannot lend a hand to tax evasion." Wagman-Ratner added, "We do not see lawyers and accountants as the weak link and latch onto them. The international community sees them as guardians at the gate, and as such they have enhanced responsibility. Law and accounting firms are not cities of refuge for money launderers."

Published by Globes [online], Israel business news - www.globes-online.com - on June 6, 2016

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

Moshe Asher, Shlomit Wagman  Tamar Matsafi
Moshe Asher, Shlomit Wagman Tamar Matsafi
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