Tax Authority targets capital hidden by Israelis in UK

Moshe Asher Photo: Eyal Yizhar
Moshe Asher Photo: Eyal Yizhar

Tax Authority director general Moshe Asher flew to London last week for meetings with six of the largest UK banks.

Israel Tax Authority director general Moshe Asher's new target is the billions of dollars that Israelis are concealing in London. He flew there last week for a series of meetings with six of the largest banks in the UK in order to enlist them in the Israeli struggle against unreported capital located in the country.

Information obtained by "Globes" shows that Asher flew to London last Wednesday for a two-day visit, during which he held marathon meetings in the city's financial center with UK banking executives. In these meetings, Asher asked the foreign banks to "persuade" their customers to file requests for voluntary disclosure of their concealed capital according to the procedure established in Israel. In practice, Asher asked the banks to exert pressure on their customers to report all the property and money that has not been properly reported in Israel.

He also asked the banks to help Israeli customers prepare orderly reports to the Tax Authority on all of their income in the UK, and to include all the financial information and transactions carried out in the "UK-Israeli" banks accounts over the past 10 years in those reports.

Asher was accompanied on his journey by Tax Authority senior deputy director general assessment and control Miri Savion, who is currently seeking the post of Tax Authority director general, with Asher's expected retirement next month.

The Tax Authority is unable to apply sanctions to overseas banks in order to make them provide help in exposing unreported Israeli capital in their possession. Asher is making his request in the spirit of cooperation between the two countries and their financial systems and the international campaign against unreported capital. A similar measure was taken in Switzerland in 2014, when Asher met with the heads of the banking system in Zurich and "convinced" them to enlist in the battle against Israeli tax evasion. The Tax Authority regards its measure in Switzerland as a great success.

Like Switzerland, London is regarded as a world financial center, which accounts for the Tax Authority's focus on it. Sources inform "Globes" that initial checks by the Tax Authority produced very high estimates of the amount of money, in the billions of dollars, kept in London by Israelis, some of which has not been reported.

During the meetings between Asher and Savion with senior bankers, compliance officers, and managers in contact with Israel, they presented to the bankers the new voluntary disclosure procedure that recently came into effect, which allows Israeli citizens to report their unreported capital without risking criminal proceedings against them. Asher explained that the procedure would be "friendly" over the coming year, and included an anonymous voluntary disclosure track allowing their customers to avoid exposing themselves at the beginning of the procedure, until the expected tax result from the disclosure is obtained. Asher explained that the validity of this advantage would expire at the end of 2018.

Tsunami of information exchanges between countries

The timing of new voluntary disclosure procedure's publication was no accident; it comes in the midst of a tsunami of exchanges of information between countries and the international campaign against unreported capital. Israel has signed over 50 conventions for the prevention of double taxation, in which some of the countries have undertaken to transfer information about income and money of Israelis within their borders. Information has made its way to Israel about its citizens over the years under these agreements.

In addition, the Tax Authority is now receiving detailed information under the Foreign Account Tax Compliance Act (FATCA), under which the Tax Authority has begun transferring information to its US counterpart, the Internal Revenue Service (IRS), about financial assets of citizens with a link to the US, and the IRS is reciprocating with information about Israelis with accounts in the US.

The Tax Authority is also scheduled to receive information from many other countries in the framework of the Common Reporting Standard (CRS) agreement initiated by OECD countries. This agreement provides for automatic exchanges of information about financial accounts of foreign residents in Europe.

During his meetings with the UK banking system, Asher presented this state of affairs to the banks' representatives, and explained that the scheduled entry into effect of the CRS rules in September 2018 (unless the legislation is delayed in the Knesset Finance Committee) would lead to the exposure of the banks accounts of Israelis in the UK, especially those who had not reported the money to the Israel Tax Authority, as legally required.

Under these circumstances, Asher explained to the foreign banks, it is preferable for Israelis who have concealed money in the UK banking system to be exposed now in the framework of voluntary disclosure requests and pay the tax and fines that they owe, thereby avoiding the filing of criminal proceedings against them.

Asher made it clear to the banks that this exactly where they enter the picture, and asked them to contact their customers and explain to them the risk incurred in concealing capital in UK bank accounts. He also asked them to help prepare the reports to the Tax Authority. These reports, as Asher explained to the bankers, should include all the existing information about the Israeli customer's accounts in the past 10 years, including the entry and exist of money, interest, dividends received, calculations of capital gains, and so forth.

Asher gave the UK bankers the results of the earlier voluntary disclosure proceeding, which ended on December 31, 2016, which is regarded as an important milestone in tax collection and expanding the network of those reporting to the Tax Authority. The previous procedure revealed NIS 30 billion in 7,500 requests for voluntary disclosure, of which 4,620 were filed on the anonymous track, 1,436 on the abbreviated track, and 1,493 on the regular track. The tax collected as a result of the requests totaled NIS 3 billion.

The new voluntary disclosure procedure, which was published exactly one year after the expiration of the previous one, provides an additional grace period for Israelis to legalize unreported capital. The procedure recently entered into effect, and will remain in effect for two years until the end of 2019, except for the anonymous track, which will apply for only one year - until December 31, 2018.

The provisions of the new procedure are the same as those of the previous procedure, including for the abbreviated and anonymous tracks.

Published by Globes [online], Israel Business News - - on February 5, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Moshe Asher Photo: Eyal Yizhar
Moshe Asher Photo: Eyal Yizhar
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