Your taxes: Proposed law would tackle the black economy

money (photo credit: REUTERS)
(photo credit: REUTERS)
On July 22, the Israeli government published a bill entitled “Proposed Law to Reduce the Use of Cash” in an effort to tackle the black economy. Some of the proposals are far-reaching, as summarized here.
What is proposed? According to the bill, “cash” means Israeli banknotes and coins and foreign currency. If the transaction price exceeds NIS 10,000, it is proposed to make cash payments illegal for: receipts by a business, payments to a business; payments of salary, donations, gifts and loans to non-relatives (except bank loans); payments to public bodies, such as taxes.
Also, if the transaction price exceeds NIS 50,000, it is proposed to make cash payments illegal for: receipts by a person not in business; payments between nonbusiness parties; receipts by Israeli lawyers and accountants for certain business services; payments of salary, donations, gifts and loans to relatives (except bank loans).
There would also be a ban on no-name check payments.
There would be an exception for transactions with tourists below NIS 25,000 or more if a report is filed with the Israel Tax Authority.
The means of payment will need to be disclosed when reporting real-estate transactions and in the books of a business.
Penalties: Offenders may face a 30 percent penalty. Business offenders would also have their names published on the ITA’s website for two to four years. Willful intent to bypass these rules may result in a three-year prison sentence.
When would it all begin? First, the bill will be sent for debate by the Knesset. If the proposed measures are passed, they will only become effective once there is in place a proven settlement system for transactions using “immediate debit” cards issued by the banks or upon request to the Postal Bank.
As always, consult experienced tax advisers in each country at an early stage in specific cases.
[email protected] Leon Harris is a certified public accountant and tax specialist