The Budget Law was passed by the Knesset on July 29 after much ado. On the last
night around 4,000 amendments were proposed, but nothing apparently came of
them. Over the next few weeks, this column will be discussing what was finally
What was not enacted were proposals that would have required new
residents and “senior returning residents” (who lived abroad five to 10 years)
to start disclosing their non- Israeli-source income and gains derived in their
first 10 years in Israel. Such income and gains are currently exempt from any
Israeli tax liability, but they would have been become reportable on annual
Israeli tax returns from this August 1 under the original proposal.
proposal was sheer bureaucracy, but it was intended to head off criticism from
the Organization for Economic Cooperation and Development in an upcoming report.
Instead, the proposal was hived off from the budget bill and may be debated and
perhaps enacted by the Knesset in the coming weeks or months.
meantime, on July 31, the OECD went ahead and published its report. It is
couched in diplomatic language, and here is what it said:
The OECD report
OECD Global Forum on Transparency and Exchange of Information for Tax Purposes
has released Phase 1 “peerreview reports” assessing the tax systems of 13
jurisdictions, including Israel, for information exchange. Later this year, most
of these reviews will feed into the ratings assigned to 50 other countries
jurisdictions, backing Group of 20 and OECD efforts to strengthen tax
cooperation and stamp out cross-border tax evasion.
As for Israel, the
OECD says the legal and regulatory framework generally ensures that ownership,
accounting and banking information is available for all relevant entities and
arrangements. The Israeli tax administration has broad access powers to obtain
requested information for exchange-ofinformation purposes under Double Taxation
Agreements, including from banks.
However, ownership and accounting
information may not be available and accessible in respect of certain trusts and
new immigrants or returning veterans. Israel has a considerable network of
double-tax conventions that provide for exchange of information in tax matters.
Nevertheless, the Israeli competent authority does not have access powers to
give effect to agreements that cover only exchange of information (as distinct
from double taxation). In addition, in a limited number of cases, where a
company has issued bearer shares, the owners of these shares may not be
Israel’s response to the findings and the practical
implementation of the international standard will be considered in the Phase 2
review, which is scheduled to commence in the second half of
Welcoming the reports on Israel and other countries, the chair of
the Global Forum, Kosie Louw of the South African Revenue Service, said: “The
Global Forum is applying pressure on all jurisdictions to implement the standard
and cooperate effectively in tax information exchange. The publication of the
ratings later this year will be a crucial moment for all those committed to
fighting cross-border tax evasion.”Some comments
The OECD is apparently
acting in an insensitive manner.
Moving to Israel involves a major
upheaval, not tax avoidance.
Many other countries discourage immigration
by means of visa controls; tax is probably not uppermost in their minds. For
well-known historical reasons, Israel is a country of refuge that offers a
10-year tax holiday to encourage immigration.
As always, consult
experienced tax advisers in each country at an early stage in specific
Leon Harris is a certified public accountant and tax
specialist at Harris Consulting & Tax Ltd.
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