Companies and individuals in business in Israel must attach Form 6111 to their tax returns from 2005 onwards. This form is 10 pages long and contains what accountants call a "chart of accounts." It requires the data in the firm's income statement, income tax reconciliation statement and the balance sheet to be sorted and presented in a prescribed sequence and signed. The aim is to make it easier for the Tax Authority to process tax returns and enhance their enforcement efforts. Most businesses will now have to adapt their existing accounting systems to fit in with the Form 6111 requirements. A one year reprieve from filing Form 6111 is available to those who file their tax return by August 31, 2006, and small businesses with revenue under NIS 300,000 in 2005. Among the items that seem to be of interest to the Tax Authority are: foreign transactions and balances, work clothes, related party transactions and balances, management fees. Among the affected taxpayers are those who are allowed to prepare their accounts on a cash basis - they may have to start submitting a balance sheet to the tax authority. The Institute Of Certified Public Accountants in Israel issued some guidance to its members in a letter dated May 1, 2006. Among the remarks in that letter are the following: * The data in the form should be final data identical to that used to prepare the financial statements attached to the annual tax return submitted to the Tax Authority. The allocation of accounting balances to the accounts in the form, therefore, should be done after the final update of the taxpayer's books. In other words - don't keep more than one set of books! * Accounting software in Israel will need to be upgraded and adapted to the requirements of the form. * Some balances in the books won't have any place in the form except in one of the general or miscellaneous slots. * On the other hand, the accounting detail required by the form may sometimes exceed that found in the taxpayer's books. In such a case, the form should be filled out based only on the data found in the taxpayer's books and it is not necessary to fill out lines on the form that do not have a parallel account in the taxpayer's books. To sum up, the form will add to the administrative and reporting burden facing Israeli businesses. It remains to be seen whether there will be teething problems at first and how lenient will the Tax Authority be. In any event, the Tax Authority may be expected to apply the additional data collected from the business sector as a whole to "compare apples with apples" and spot individual taxpayers whose results appear significantly out of line compared with the average or other similar taxpayers. firstname.lastname@example.org The writer is an International Tax Partner at Ernst & Young Israel.