Triggered by the Netanyahu scandal? New 'revolutionary' bill leaves little option for tax evasion in Israel
A government bill has been submitted to the Knesset to amend the Income Tax Ordinance, adding a chapter on the exchange of information under international conventions. This will allow the Israel Tax Authority to share information with tax authorities of other countries, including countries with which has no tax treaty, and including tax havens.
"This bill is revolutionary, because it gives the Tax Authority very broad powers to obtain information overseas, including in tax havens. It also allows it obtain information going back ten years, including on bank accounts that have closed and companies that are no longer in business, and to share confidential information about Israelis with the tax authorities of other countries," says Israel Bar Association Tax Committee deputy chairwoman Adv. Shosh Shaham, and a member of the Committee of Experts on International Cooperation in Tax Matters. "When wealthy Israelis and tycoons put their money in tax havens around the world, they could not have imagined that they would be exposed."
Under current law, the Tax Authority can only share information with foreign tax authorities through conventions for the prevention of double taxation with other signatory states. Israel has 52 such agreements, all of which include clauses for the sharing of information about money and assets.
Israel has no tax treaties with many other countries, including tax havens, such as Bermuda and Barbados, which levy little or no taxes on foreign residents. The Israel Tax Authority cannot obtain information about the money and assets of Israelis in these countries, except by signing an information sharing agreement. However, the current Income Tax Ordinance mandates the Tax Authority to maintain confidentiality on taxpayers.
"The bill was drafted, because it abolishes the duty of confidentiality, allowing the signing of reciprocal agreements independent of the convention," says Shaham. She says that under these circumstances, people who have not yet disclosed their foreign assets to the Tax Authority should do so now, before the amendment is passed and comes into effect.
"This bill is an earthquake for Israeli business and wealthy individuals. Now is the last chance to submit a request for voluntary disclosure, which grants immunity from criminal prosecution with the tax settlement, because after the Tax Authority obtains the information there will be no more criminal immunity," says Shaham.
Shaham says that the bill's objective is important and essential to combat black capital held by Israelis overseas, which is estimated at hundreds of billions of dollars, and to bring it into the Israeli tax net. However, she warns, "There is the issue of balance and not harming the rights of the individual. The amount of information shared between the tax authorities is very extensive under the bill. It not only allows the sharing of existing information between tax authorities, but it also allows the sharing of information that they do not possess, and there is a need for checks and tax investigations at the demand of the other country to obtain it."
The bill includes clauses to protect Israel's security. It bans the Tax Authority from sharing information that is liable to harm Israel's security, public safety, and ongoing investigations, or to share information without reciprocity. Shaham warns, however, "The bill has no clauses that protect Israeli taxpayers' privacy."
Shaham says that the bill must include a clause requiring the Tax Authority to notify taxpayers that it intends to provide a foreign tax authority with information about them.
- What's going on with MENA debt capital markets?
- Rachel Corrie vs. Arab Bank: hypocrisy and injustice in the US' legal system
- Iraqi Kurdistan seeks investor funds amidst independence 'grey area'
- Britian's financial sector displaying sharia-compliant tendencies
- Excessive caution? Why 'perfectly legitimate' SME's are struggling to find financing in the UAE
- Netanyahu included? Israel to punish citizens who hide their money in the US by seizing 50% of concealed funds
- Dubai’s dirty shekel secret? Israelis saving pennies by hoarding money in the Emirate's tax haven
- Bush rejects counter-terrorism bill, Israel loses $200 million
- Elbit Systems to provide processing system for Israeli Money-Laundering Prohibition Authority
- Israel gets biggest share of American aid assigned to the Middle East