The Israel Tax Authority possesses all the Panama Papers and the information in them, and is checking the Israeli names appearing in them, Tax Authority inspector Shlomi Astrogo, CPA, disclosed at an Institute of Certified Public Accountants in Israel conference in Eilat yesterday. The Tax Authority previously stated that it had not obtained the documents, but Astrogo confirmed to "Globes" that the documents had arrived at the Tax Authority investigations department. "The Tax Authority has all the Panama Papers and more," he said.
The Panama Papers, a collection of 11.5 million confidential documents belonging to Mossack Fonseca, a Panamanian law firm, were leaked by an anonymous individual. They include documents from over 200,000 companies and their shareholders from all over the world, as well as evidence of large-scale financial activity by politicians in many countries.
Astrogo said, "The Tax Authority received the information in the Panama Papers from a number of sources: some known to the public and some not. The documents include mainly a list of names. No IDs or taxpayers particulars appear there. The particulars in the documents are now being fed into the system, and we are cross-checking them in order to identify the Israelis and see whether they have properly reported their overseas income. We are cross-checking with our intelligence system and tracking down the person."
It is not a common event for senior Tax Authority officials to be discussing their processes taking place behind the scenes. At a panel yesterday dealing in the failures and achievements of the voluntary disclosure procedure as a tool for extending tax collection and enforcement, Astrogo and Tax Authority senior unreported capital disclosure department manager Amir Davidov, CPA, provided a look at what is taking place in Tax Authority corridors involving the voluntary disclosure procedure that allows taxpayers to disclose unreported capital without exposing themselves to criminal proceedings.
The Tax Authority is currently processing 5,000 requests for reporting hidden capital in the voluntary disclosure framework. As of yesterday, the number was 4,936, and several dozen new requests are being made every few hours. 60% of the requests are being made on the anonymous track, in which the taxpayer is not required to reveal his name in the first stage; 20% in the shortened procedure designed for taxpayers wishing to disclose up to NIS 2 million in unreported income; and 20% in an ordinary voluntary disclosure procedure.
The extended deadline for the voluntary disclosure procedure was set to expire at the end of the month, but the Tax Authority has already announced a further extension of several months for the procedure, originally scheduled to end in September 2015. The planned extension is part of the preparations for the taking effect of the legislative amendment applying the Prohibition on Money Laundering Law to tax violations in order to allow taxpayers to enter the voluntary disclosure program before being exposed to the stringent sanctions stipulated by the Prohibition on Money Laundering Law.
The official announcement of the extended deadline for the voluntary disclosure procedure has not yet been issued, and the tax sector is therefore buzzing in anticipation of the procedure. Many taxpayers are preparing to submit urgent requests in the coming days in order to avoid missing the deadline if it is not extended. The Tax Authority is observing the coming storm. "The last time the deadline for the procedure was approaching, 1,600 requests were filed in two days. I very much hope that this time, we can handle the load of requests for the procedure submitted in the final days, without any bottlenecks and distress calls," Astrogo said on the panel.
A load of requests anticipated
Astrogo also said that he had encountered "requests by taxpayers to disclose an account with a few dozen shekels concealed from the authorities," adding, "the smallest sum approved by the investigative department was for the concealment of NIS 9. The person asked to declare it, and we approved a voluntary disclosure procedure for him. The highest sum approved to date in the voluntary disclosure framework was $48 million - NIS 155 million."
Astrogo, who does not usually grant interviews, provided figures for the voluntary disclosure procedure. "The regular procedure began in 2005, under which a few dozen requests were filed annually until 2011, when we published the first special administrative voluntary disclosure order. Under the previous administrative order, 1,300 requests were filed over a period of several months - and that was an unprecedented achievement. Under the new procedure, the numbers are much higher. As of this morning, we had 4,916 requests, and by noon, the total was already 4,936. We expect to exceed 6,000 requests before the deadline for the procedure."
Astrogo added, "The Tax Authority has already handled almost 2,500 requests. 1,300 were approved - that is a good approval percentage. Up until now, the procedure has revealed NIS 17 billion in unreported capital that entered the regular Tax Authority reporting system. The tax paid to date as part of these disclosures amounts to NIS 650 million."
Average handling time: two months
The participants in the panel, moderated by Yuval Cohen, CPA - Institute of Certified Public Accountants in Israel vice-president Iris Stark, CPA; Adv. Daniel Paserman, CPA, from the Gornitzky & Co. law firm; and Artzi, Hiba, Elmekiesse, Cohen founding partner and co-owner Ran Artzi, CPA - presented what they said were the existing problems in implementing the voluntary disclosure procedure to the Tax Authority representatives. Among other things, they asserted that foot-dragging was taking place in the processing of voluntary disclosure requests, and that handling for some of the cases took many months.
Astrogo explained, "The average handling time for a request should be two months. Our aim is for a request to receive an initial answer within a week at most. We have received complaints that one request was left unanswered for eight months - and that can happen. Some of our checks for data given to us take place in external places in Israel and overseas, and it takes time to check them. When the data are within the Tax Authority, the answer comes much more quickly." Astrogo also revealed that as a result of malfunctions in the Tax Authority computer system, some of the requests filed never entered the system.
The panel participants also complained of a substantial gap between the Tax Authority's official lenient policy on voluntary disclosure and the handling of taxpayers actually entering the disclosure procedure, who are regarded as criminals. They said that those taxpayers were liable to be exposed later to criminal proceedings if their request for inclusion in the procedure is rejected. Astrogo made it clear that the allegation that the Tax Authority was persecuting taxpayers who disclosed their unreported income in the framework of the procedure, and whose requests were rejected, was incorrect. Asked about the allegation that the investigative department was not honoring the civil tax arrangements submitted with tax assessment officers, and was instituting criminal proceedings, Astrogo answered, "If the taxpayer pays the tax in the arrangement, the investigative department has less reason to begin criminal proceedings against him."
The panel participants also complained about an absence of transparency in the procedure, which they said creates uncertainty. Sometimes, they said, in a case in which the Tax Authority rejects a voluntary disclosure request, it does not explain its refusal. Astrogo responded, "In a large proportion of the rejected requests, the reason is that we have concrete information about those people, and when they submit the request, I see that I already have the information. One of the conditions for the procedure is that the Tax Authority has no previous information. When there is something vague about a certain person, I act as if I have no information, but in cases in which I already have information, I don't explain the rejection, because I don't want to reveal that an investigation against the taxpayer is already taking place, the information I already have, and its sources."
A uniform policy in practice
Astrogo also clarified, "In some cases, I reject the request, because the person is not meeting the conditions for the procedure, and that is to his benefit. For example, the account that he wants to report does not have to be reported, because it doesn't exceed the tax threshold. Maybe he is obligated go to the tax assessment official and report his income, and maybe not. We stop it in the investigative department, because he doesn't need criminal immunity, because he didn't evade taxes."
The panel participants also complained that there is no uniformity in the leniency given to taxpayers in the framework of the procedure; different representatives obtain different results, depending on their bargaining power, or different tax rates are charged in similar cases, merely because the report was made to tax assessment officials in different areas. Davidov explained that while there was no uniform tax format for a voluntary disclosure procedure, "the process is much quicker and uniform than in the past. There is always room for improvement and differences between different income tax offices, but there is a general format and uniform policy applied in practice at most of the offices."
Published by Globes [online], Israel business news - www.globes-online.com - on June 7, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016