The cabinet on Tuesday unanimously approved a committee to examine ways of reducing cash use, a means of maximizing tax collection and fighting money laundering.
"In Israel's economy there are billions of shekels that are not taxes, so the public does not enjoy that money. The committee will find innovative, logical solutions to fix this situation and present a program for the government's approval," said Harel Locker, who will represent the PMO on the committee.
A Visa-sponsored study released in June estimated that Israel's shadow economy, unreported or under-reported transactions within the legal economy (e.g. excluding illicit activities like drug-dealing), stood at NIS 185 billion, some 18.9% of GDP. Reducing the shadow economy by 2 percentage points could result in up to NIS 9 billion in extra tax revenues, the study found.
“Cash is the fuel of the shadow economy. It’s the only way to work off the books,” the author's study said at the time. “When you use cash, it’s easier to hide income.”
According to the Bank of Israel, the public is transitioning naturally toward electronic payments, but the government must ensure that it is doing so properly. While a completely "cashless society" may be unrealistic, the world may be heading toward a system far more dependent on electronic payments.
Israelis are still far more likely to use cash than charge, according to the bank; in 2012, Israelis withdrew NIS 205b in cash, but only spent NIS 139b on credit cards.
Among the policies that will be explored are reducing fees on card transaction, boosting debit-style cash cards, multiplying electronic points of payment, and increasing access to electronic payment for vulnerable or weaker populations, who may not have a bank account.
It could also add new limits on cash transactions. Currently, cash transactions are forbidden in amounts over NIS 20,000 for businesses, but not between private citizens or between individuals and businesses.
Think others should know about this? Please share