Taxes: The price of civilization

Despite scandal, Israeli tax system is becoming more civilized.

Over a dozen high-ranking figures at the Tax Authority are being interrogated on suspicion of giving tax breaks to leading businesspeople in return for their help in obtaining advancement within the bureaucracy - discounts in return for appointments. Ironically, the shocking story broke just as the Authority was to receive a prize for outstanding performance, especially in expediting payments to business owners in Israel's North during the summer's conflict there. The most important ethical reminder I can make is that all those involved are innocent until proven guilty. Not everyone who is arrested is indicted, and not everyone who is indicted is convicted. In fact, figures I have seen show that Israel has an unusually low proportion of indictments and convictions. So patience is in order, especially since the crimes alleged seem exceptionally difficult to prove. Assessors have limited authority to approve compromises, and it is necessary to show that they did so in return for an appointment that the businessperson involved cannot actually deliver. The "bribe" involved is not a wad of dollar bills, or even a cushy job, not even a promise of a job, but rather a promise that the assessed individual will use his or her influence to try and convince a politician to advance the assessor's career. So the allegation is that assessed people offered assessors - you give me a tax break, and I promise you that I will promise someone else a benefit in order to persuade them to promise to advance your career. Alternatively, the promotion comes first, and the appointee promises that after he advances he will be lenient. Doesn't sound easy to find a smoking gun here. Still, stranger things have happened, to say the least, and the average citizen will just have to wait, probably for years, until the legal system has had a chance to clarify the allegations. One concern that is repeatedly being raised is that the scandal will have an adverse impact on the willingness of the average Israeli to be forthcoming with his/her taxes. Knowing that the rich and powerful have the ability to evade taxes reduces the feeling of fairness and equity, which is so important in enabling an orderly and inexpensive tax collection system. Such a reaction would certainly be a shame. All the evidence is that the Israeli tax system has become much fairer and more transparent in recent years. Veteran economics blogger Sever Plocker wrote about this at length, pointing out that the atmosphere of mutual enmity and suspicion has been lifting at the Tax Authority in recent years, and there has been a growing willingness to trust taxpayers and meet them halfway. There is also evidence that the kind of abuses alleged, even if they took place, are becoming less rather than more frequent. Tali Yaron Aldar, former Tax Authority director, stressed to a reporter that the current management structure of the Authority makes it much more difficult to manipulate results than it was in the past. The great US Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization." Israelis pay a lot of taxes, more than most advanced countries but less than some. But we also get a lot in return, and we enjoy a remarkably secure life given our relatively new democracy and the incredibly stormy region we inhabit. There is no reason for one alleged scandal to make us forget the great progress Israel has made and continues to make towards financing the valuable government services we receive with a transparent and equitable tax system. The writer is research director at the Business Ethics Center of Jerusalem (, an independent institute in the Jerusalem College of Technology.