"We finished with the voluntary disclosure administrative order at the end of 2016. 7,400 requests for voluntary disclosure were filed, far more than we expected. This is an unprecedented success. It provided an escape for people who wanted to repent and start with a clean sheet. 400-500 of the requests were by diamond traders - an entire sector is doing penance. People who lurked in the shadows for years are now in voluntary disclosure, being assessed, and paying tax. That's very important. It's not only the diamond traders, though. There are people with overseas accounts, businessmen, and others who began the procedure. We discovered NIS 25 billion in capital, an assessment of over NIS 3 billion, and we'll get to those who did not disclose," Israel Tax Authority head Moshe Asher said today at a panel of the Institute of Certified Public Accountants in Israel conference in Eilat. He repeated that the Tax Authority had been taking steps in recent months to renew the voluntary disclosure procedure enabling people to make their unreported capital legal by paying tax on it, without being threatened by criminal proceedings.
Asher added, "We have already sent a draft to the Ministry of Justice in order to renew the procedure on a similar format, but different, because there are still Israelis who have 'forgotten' that they have more money that they did not disclose to us. The program is a little different, because we have learned some lessons. We will continue the anonymous track. 60% of the requests were on the anonymous track, so we have asked to continue it (a track in which the taxpayer discloses his name after hearing what his tax liability is, not at the beginning of the process, E. L.-W.)."
"Starting next year, we'll exchange information with over 90 countries"
Asher also referred to the Tax Authority's enforcement measures against those who did not disclose their unreported capital. "We are making arrests and filing indictments all the time, and there are several more indictments in the pipeline as a result of the struggle against unreported capital. We're exposing a lot of capital. We're collecting a great deal of information about Israeli capital around the world through the lists we obtained from UBS, Panama, and so forth. We have started exchanging information with the US, and starting next year, we'll exchange information with over 90 countries. The world is closing in - that's the trend. If every country collects its real taxes, every country will do things for the benefit of all its citizens," he said.
Among other things, the panel dealt with the tax legislation in the framework of the Economic Arrangements Law. Asher was asked to respond to criticism that the state was sneaking tax legislation through the Knesset by including in the Economic Arrangements Law and complaints that the high-speed enactment of this law was not the right procedure for passing weighty tax legislation.
Asher explained, "The question always arises of whether the Economic Arrangements Law or ordinary legislation is the right way to handle taxation. We have no choice. In Israel, if the government wants to rule and govern and promote tax reforms and changes, it has no choice other than to do it in the Economic Arrangements Law. Look what happened to the legislation that was removed from the Economic Arrangements Law, and to this day has not yet been sent to the legislative committee. When we don't raise legislation for discussion and don't promote it, it detracts from the tax collected in Israel. Raising and cutting taxes is part of the budget. The Economic Arrangements Law is exactly where it belongs."
"As long as Jane Doe doesn't have to file a return"
Asher spoke about the wish to impose a general reporting duty and the duty to report that was already extended in the Economic Arrangements Law. One example is the duty to report tax planning opposed by the Tax Authority, which taxpayers have to declare in their annual returns. Another is the extension of the network of those reporting following the sending of letters demanding a declaration of assets to people who have not reported income, or reported low income, thereby setting off an alert on the Tax Authority's computers.
"I don't understand the hue and cry about the reporting duties we have already imposed," Asher said. "We've extended the network, but we haven't taken employees earning NIS 10,000; we've gone after those earning NIS 40,000 or more, and who are doing creative tax planning in order to evade taxes. When you boil it down, I think it's very much the right thing to do.
Asher continued, "Extension of the network of reporting and those filing returns is in line with the international trend. We have sent over 130,000 letters to people who lived beyond the reporting circle and who thought they did not have to report. We have brought tens of thousands of people within the network and collected NIS 1.3 billion in tax. There will soon be another wave of tens of thousands of letters. As I see it, as long as Jane Doe doesn't have to file a return, and we're filtering out such cases, there's no problem with it."
Commenting on Minister of Finance Moshe Kahlon's family tax benefits plan, Asher said, "It's a pity that this legislation wasn't passed in the Economic Arrangements Bill, because then a multi-year budget would have been found for it, and it would have been permanent, not temporary. The family tax benefit plan focuses on families that have fallen between the cracks - young couples with small children in diapers. Had it been put in the Economic Arrangements Law, we would have found multi-year budget resources to pay for it, and it would always be put in legislation. Since it was enacted outside the Economic Arrangements Bill, we found it a temporary budget.
"Fortunately, the Tax Authority's tax collections are going well, and there's a surplus. There were also spending gaps, so we found a budget source to pay for them, but that's not a permanent solution. It's an administrative order. I assume that when the 2019 Economic Arrangements Law comes around, budget resources will be found to make these orders permanent, because it's right to give to parents of children up to age 6, and it's right to give help to afternoon childcare facilities."
As for the exemption from the duty to file a tax return (in contrast to the US, where everyone is obligated to file a return), Asher said, "In Israel, there are people hiding behind this exemption and evading taxes, both in Israel and overseas. Take an architect working in Israel and also providing services to overseas clients, for example. Did he produce some of his income in Israel? Where we are concerned, nothing. He reported nothing. Unfortunately, it's politically impossible to change this right now and impose a general duty to report. I hope the government straightens up sometime."
Published by Globes [online], Israel Business News - www.globes-online.com - on July 3, 2017
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