It may sound like a gangster movie, but it could come our way soon if we don’t
pay our taxes. Last year, the government collected NIS 39 billion less than it
In last week’s column we modestly pointed out a way of
effortlessly collecting a good piece of that by tightening up on transfer
pricing within international trading and service groups.
But not everyone
reads The Jerusalem Post. Instead, attention in government circles is now
focusing on a bill for tightening tax enforcement, known as the Proposed law for
Extending Tax Collection and Tightening Enforcement (Legislative Changes and Ad
Hoc Measures) 2012, published on November 5, 2012.
Below we briefly
review a few of the proposals in this bill. It remains to be seen what will be
A key proposal is to allow income-tax,
real-estate-tax and value-added-tax officials to pass over the task of
collecting taxes to a “coordinator” who is actually the regional bailiff
currently charged with collecting fines and other amounts imposed by the courts.
The regional bailiff and his staff are not exactly lawyers; they are people who
are told a debt is unpaid and are instructed to distrain assets in
The bill proposes to use these same pleasant fellows and to
give them confidential taxpayer information so that they can do their job. The
Justice Ministry, and not the the Finance Ministry, administers the
If a company with an income-tax or VAT debt
transfers its activity to a 25-percent-or-more major shareholder, directly or
indirectly, for less than full consideration and is then unable to pay the tax
debt, it is proposed that the tax debt is collectible from the shareholder. The
same would apply if the major shareholder transfers an activity to the
This will supplement rules making a company liable to pay the
tax debt of another commonly controlled company if an activity is transferred
between the two companies.
Under current law, in the event of
a disagreement between the Israel Tax Authority and the tax payer, the tax not
in dispute must be paid immediately. It is proposed to require a guarantee to
cover potential payment of the tax in dispute.
proposed to allow the courts to issue an injunction preventing a 25%-or-more
shareholder of a private close company (five or fewer shareholders) with a tax
debt from leaving Israel.
Late VAT It is proposed to allow the VAT
Authority to withhold a VAT refund if a VAT return is 90 days late.
It is proposed to forbid cash payments above NIS 10,000, instead of NIS
20,000 under current law. Amounts above these levels must be paid by bank
transfer, credit card or check.
Infringements will result in 15% penalty
for the payor.
It is proposed to make deliberate tax
evasion, or assisting someone else to evade tax, not only a criminal tax matter
but also a money-laundering offense.
This will also apply to false
accounting or reporting, forgery, concealment, destruction or changes to
accounting records, causing others to do so and giving false answers to
To sum up Tax enforcement is going to be further tightened.
As always, consult experienced tax advisers in each country at an
early stage in specific cases.
firstname.lastname@example.org Leon Harris is a certified
public accountant and tax specialist at Harris Consulting & Tax Ltd.