Your taxes: Expect stronger compliance in 2014

New bill aims to reinforce the ability of the Israel Tax Authority to deal with the black economy and tax evaders.

By LEON HARRIS
Money cash Shekels currency 521 (photo credit: Reuters)
Money cash Shekels currency 521
(photo credit: Reuters)
On November 19, the Knesset Finance Committee approved a number of measures in the oddly named Bill for Deepening Collection and Increased Enforcement (more efficient means of collecting and reporting). These measures will become law after a second and third reading in the Knesset, which is usually a formality.
The bill aims to reinforce the ability of the Israel Tax Authority to deal with the black economy and tax evaders.
What are the expected new measures? First, businesses with annual revenues of NIS 1.5 million or more will have to file detailed online VAT returns from the beginning of 2014. This catches most businesses in the economy.
Currently the annual revenue threshold is NIS 2.5m.
This means electronic filing of every single sale and purchase of the business.
It is all done by approved accounting software, but it enables the ITA to embark on an enormous matching-up process and to detect discrepancies between virtually all reported sales and reported purchases within the economy. There is a gap regarding imports and exports, as foreign businesses don’t normally report their side of the transaction to the ITA, only to their own tax authority.
Second, the penalty for delays in filing an online return will be “only” NIS 600 rather than the originally proposed amount of NIS 1,700.
These measures were accepted despite fierce criticism from professional bodies that complained about their broad scope. They also complained that work was being shifted onto the tax representatives’ shoulders. The ITA replied that this was good for efficiency. About 15,000 businesses will have to start online reporting.
As always, consult experienced tax advisers in each country at an early stage in specific cases.
leon@hcat.co Leon Harris is a certified public accountant and international tax specialist at Harris Consulting & Tax Ltd.