Your Taxes: Do taxis pay taxes?

So the moral is: Pay your taxes; our government needs every shekel and doesn’t like being taken for a ride.

By LEON HARRIS
May 8, 2012 23:24
2 minute read.
Your Taxes

Your Taxes_311. (photo credit: Thinkstock/Imagebank)

 
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The taxis in New York are mustard yellow, in London they’re shiny black and in Israel they’re polar white. They perform a valuable service getting you from point A to B, they save you parking problems and the drivers know every sports team.

In Israel, in the unlikely event that you get ripped off, you can photograph the license number painted on the door using your cellphone and complain to the Transportation Ministry.

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As for the fare, some Israeli taxi drivers generously offer two approaches: Either they turn on the meter, you pay the amount displayed and get a receipt when you reach your destination, or you can agree in advance on a fare without the meter, in which case you’ll probably arrive sooner but you won’t always get a receipt.

More recently, a third – more generous – approach has emerged. The taxi driver might offer you a receipt for more than the fare you actually paid. Is this okay? Or is it an early/late birthday present to bump up your expenses? And what’s in it for the driver? All has now been revealed by the Israel Tax Authority in a dramatic May Day announcement. Tax enforcement officials were surprised to discover that some taxi companies have been renting out taxis on the “Fix” basis.

It works like this: Each taxi-license number gets applied to a number of taxi cabs simultaneously; the taxi fares are not properly reported as income to the tax or VAT authorities by the driver or the taxi owner; the driver pays a weekly or monthly rent to the taxi owner in return for a paycheck, but the rent isn’t properly reported as income by the taxi owner; the paycheck is effectively a fake, but the taxi owner might claim the amount as an expense; the drivers might not have a VAT registration.

Intrepid tax enforcers on April 30 raided two taxi companies in the Jerusalem area and picked up 20 drivers and other assorted associates.

They are all now assisting with various inquiries and registering for all tax purposes.

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So the moral is: Pay your taxes; our government needs every shekel and doesn’t like being taken for a ride.

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 tax specialist at Harris Consulting & Tax Ltd.

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