Your Taxes: Lessons to be learned from Golan tax probe

What does all this mean? There seems to have been a sting operation which yielded unfortunate results for Eyal Golan.

By LEON HARRIS
Eyal Golan album 311 (photo credit: Courtesy)
Eyal Golan album 311
(photo credit: Courtesy)
The Israeli Tax Authority announced on January 17 that Eyal Golan, a famous Israeli singer, was arrested and released on bail by the Jerusalem Magistrates Court.
Golan is being accused of concealing transactions amounting to more than NIS 1 million. According to the indictment filed with the court, the VAT Department were looking into the entertainment sector, and became suspicious that Golan, via Liam Productions Ltd., wasn’t reporting part of his income from performances at private events.
As part of an undercover inquiry, much evidence of this came to light. Golan, as director and owner of the company received money via employees of his office for which no official tax invoices were issued.
According to the indictment, receipts from private events were concealed, most of them were not reported and in many cases no tax invoices were issued but in other cases invoices were recorded covering only part of the actual consideration received.
That was merely the end of the undercover inquiry and the beginning of an open inquiry for Golan and his team at Liam. They include Golan Sharabi, director; Arik Bnei Moshe, financial clerk; and Mr Dadi Handali, private events manager. They were all arrested and released on bail.
In Golan’s case, he had to lodge NIS 150,000 in cash with the court, provide a personal guarantee in the amount of NIS 250,000 and a third party guarantee in the amount of NIS 400,000 among other things. One of the other suspects was banned from leaving Israel. All their homes were raided and computers, cell phones and many documents were removed.
In the course of the inquiry, and in “confrontations”, those allegedly involved gave many conflicting versions, but no explanation was apparently yet received for the under-reported income. The matter continues.
What does all this mean? The above is taken from the Tax Authority’s press release. There seems to have been a sting operation which yielded unfortunate results. The Tax Authority regularly carries out sting operations among businesses in different cities and publish the results.
For example, on January 3, the Tax Authority opened the new year by announcing that 50 tax officials supported by Police officers conducted visits throughout the Sharon region (Kfar Saba, Raanana, Hod Hasharon, Herzliya and Ramat Hasharon) at places that work late such as kiosks, coffee shops, restaurants, pubs, astrologists, spas, and guest houses.
They found that 30% failed to record receipts and 21% had “significant defects”. No doubt, the Tax Authority will help remedy those defects.
It is notable that computers and cell phones were confiscated. They will presumably reveal much data about the real extent of business operations conducted.
The Tax Authority also has access to the Interior Ministry’s records of people entering and leaving Israel, the land registry and the vehicle registry, which can often be revealing. At the international level, Israel’s tax treaties with over 50 other countries enable the respective tax authorities to exchange information.
What should you do in such a situation? First, prevention is better than cure – report all your income for tax and VAT purposes and use a professional accountant. Second, if you omitted to report income, consider doing so voluntarily in consultation with your tax advisors. Third, if you are questioned and warned that your “evidence” just turned into a criminal investigation, you will urgently need a lawyer experienced in such case.
The above was brief and general. Always consult experienced tax advisors 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.