"The Israel Tax Authority has now received information about thousands of accounts in the Cayman Islands belonging to Israelis, some of which we know were not reported. The Tax Authority is planning to examine this matter in depth," Tax Authority director general Eran Yaacov stated today at the Institute of Certified Public Accountants in Israel economic conference in Eilat.
Among other things, Yaacov was referring to information obtained in the framework of the US Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS), which include international exchanges of information. He added, "Information was received and is being investigated… It is worthwhile taking advantage of the voluntary disclosure procedures, which will continue until the end of 2019 and will not be renewed."
As reported by "Globes," many Israeli citizens have received letters from banks around the world in recent months seeking to clarify their residency. The reason for the letters is Israel's membership in the system for exchanging information between tax authorities around the world. Dozens of countries are part of this system in the CRS framework initiative by the Organization for Economic Cooperation and Development (OECD). The Knesset Finance Committee passed the regulations facilitating transfers of information to and from Israel in January. Starting in July this year, Israel will begin receiving financial information from dozens of countries about its citizens.
The international exchanges of information are part of a global trend in recent years in which the world is becoming financially transparent and tax shelters are being eliminated. The international campaign against international unreported capital and the shadow economy has undergone drastic changes in recent years. Regulators throughout the world have declared all-out war against tax evaders and money launderers. After marking unreported capital as a target, they have begun extending their reach throughout the world, with information exchange agreements being signed all over the world.
Israel has signed over 50 conventions for preventing double taxation, in which some countries have undertaken to provide information about the income and money of Israelis in their territory. Under these agreements, Israel has obtained information about its citizens over the years. The Tax Authority is now obtaining detailed information under the FATCA agreement, in which the Tax Authority in Israel has begun sending information to the Internal Revenue Service (IRS), its US counterpart, about the financial assets of Israeli citizens with a connection to the US. In return, Israel is obtaining information about US accounts of Israelis residing there.
Transparency is now taking another step forwards in the CRS agreement, which provides for automatic exchanges of information about the financial accounts of foreign residents in Europe and other countries. Yaacov called on Israelis who have not yet reported their wealth to enter a voluntary disclosure procedure soon. Referring to figures for last year's voluntary disclosure procedures, he said that starting in 2018, 520 requests received were being processed, 197 had been rejected, and 151 were approved.
In addition to speaking at the conference, Yaacov took part in a panel discussion on "Budgetary Pressure for 2020, the Tax Authority's Service Covenant with the Public and a Growth-Encouraging Economy: Are They Compatible?" chaired by Institute of Certified Public Accountants president Iris Stark, CPA. Other panelists included Institute of Certified Public Accountants former president and Tel Aviv district tax committee member Ofer Minirav, and Institute of Certified Public Accountants VP, tax committee member, and VAT liaison committee chairperson Adv. Liat Neuwirth, CPA.
Taxing the gig economy
Yaacov also commented on the Tax Authority's policy in the coming years. He said that the tax world's golden triangle was a high rate of public compliance with the tax laws; efficient enforcement by the Tax Authority; and accessible, clear, rapid, convenient, and personalized service. He added that the Tax Authority planned to continue improving and streamlining its activity in each of these areas. Yaacov also addressed the challenges facing the Tax Authority and the topics that were under examination, including taxation of the gig economy, with more and more young people choosing to be self-employed. Yaacov said that changes in the economy required renewed thinking about the models needed in enforcement, making reporting options accessible, taxation of vehicles, international tax reform, examining permissible expenses, and a model of allocating invoices for dealing with fictitious invoices.
Yaacov also commented at the gathering on preparations for another election campaign and the budget, saying, "We are preparing to deal with the budget with respect to spending and revenues. At the same time, keep in mind that we are a strong, stable, and proven economy. We have low unemployment and very respectable growth."
He added that the Tax Authority was formulating plans for taxing untaxed sectors, which he would present to the next minister of finance. "We will be glad to present our proposal for dealing with tax pockets to the minister of finance, including legislation for taxing digital platforms that do not pay tax in Israel," he said.
Yaacov went on to say, "Thinking and legislation for imposing VAT on downloading applications from overseas, which are currently not taxed, is needed. In addition, there are a great many exemptions that could generate revenue, for example, the exemption for rent. Taxing rent could generate an estimated NIS 1 billion in revenue."
Published by Globes, Israel business news - en.globes.co.il - on June 3, 2019
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