Comptroller: Publish tax evaders' names, detail cases and decisions

The Tax Authority responded to the comptroller that each case requires individual discretion in terms of the level of indemnity required, preventing uniformity from case to case.

For the sake of fairness and transparency, State Comptroller Micha Lindenstrauss said in a report released Tuesday that the names of tax evaders who opt to pay an indemnity instead of going to court, as well as the amount they were required to pay, must be made public. The Tax Authority also must improve documentation of how it decides such cases, the report said. "Transparency and equality necessitate publicizing the names. The public has the right to know who paid an indemnity and how much, and the institutions must be interested in openness and transparency also, in order to indicate to the State's citizens that they are operating impartially and on the basis of principles of absolute equality among [delinquent] taxpayers," Lindenstrauss said. Tax delinquents are offered "significant relief" in that they may avoid criminal proceedings - and the risk of imprisonment - by agreeing to pay an indemnity on the amount hidden from the authorities, Lindenstrauss said, adding that the Tax Authority also benefits by saving time in handling tax evasion cases. Currently, delinquents who opt to pay indemnities are also spared the shame of having their case publicized. Should their names become public record even if they pay an indemnity, tax delinquents may choose to go to trial to clear their names in court, Lindenstrauss noted. "Even though the number of lawbreakers in tax offenses preferring regular criminal proceedings over the payment of an indemnity could grow, and hearing the cases would take more time, clearly the principles of transparency, equality, and the ability to monitor have the upper hand in this matter," Lindenstrauss said. According to the report, the Office of the State Comptroller found that 16 of a sample of 44 cases from 2002 to 2004 were heard in the regular indemnity committee, despite the fact that they should have been handled by the authority's superior committee since they involved the concealment of more than $100,000. An investigation of 13 of the 44 cases, in which there was "solid evidence" of delinquency, found a wide range in the amount of indemnities required - tax evaders in "good" financial states were charged between 19% and 95% of the amount concealed, and those in "bad" financial condition were required to pay anywhere from 4% to 65%. "These findings raise doubts regarding the degree to which fairness and equality are ensured in the decision making process of the indemnity committees," Lindenstrauss said. The Tax Authority responded to the comptroller that each case requires individual discretion in terms of the level of indemnity required, preventing uniformity from case to case. An indemnity can be up to double the maximum fine that may be charged by the courts for a given transgression (in possible combination with imprisonment), but no minimum level was fixed. Furthermore, the lack of basic information hindered in-depth investigation into the cases to judge the fairness of the authority. Only the identity of the delinquent, the decision of the committee, and the amount of indemnity required were documented - not any details of the proceedings nor any indication of how the committee came to its decision, the report said. The Tax Authority responded then that considerations behind a decision made by the committee do not require documentation, since it is not a court ruling, but said Tuesday that it is in favor of transparency and would agree to publish all details besides names, so as not to discourage delinquents from the relatively quick and efficient option of paying an indemnity. In 2004, some 600,000 such delinquents - whether companies or self-employed workers - were registered with the Israel Tax Authority. Indemnities were levied against 135 delinquents, requiring them to pay a total of NIS 11.7 million, twice the NIS 5.7m. in indemnities charged on 110 cases in 2002. "The fight against tax evaders who do serious and longlasting harm to the treasury and citizens of the state necessitates that strong steps be taken, in a manner that would prioritize the principles of deterrence both in the regular judicial process and in the privileges given to those who pay an indemnity," Lindenstrauss commented. "Tax delinquents who pay an indemnity are not doing the state 'a favor' by paying the indemnity. The state is doing them a favor by agreeing that an indemnity be paid."