Hummus with a side of tax evasion: Where did NIS 120m. go in the falafel industry?

Money believed to be undeclared to VAT from hummus and falafel shops prompted an investigation.

 TO MAKE THE claim that any food, be it hummus, falafel or kubbeh, is inherently one culture or another is doing a disservice to the generations who have honed and preserved those recipes. (photo credit: NATI SHOHAT/FLASH90)
TO MAKE THE claim that any food, be it hummus, falafel or kubbeh, is inherently one culture or another is doing a disservice to the generations who have honed and preserved those recipes.
(photo credit: NATI SHOHAT/FLASH90)

The hummus may have been served with spices, pickles and tahini, but it was served without a receipt: the hummus and falafel industry is known as one where quite a few purchases are made for low amounts, for which no receipt is requested or given.

This raises the question: are all sales legally registered and reported to the Tax Authority? The latter suspected that the truth is not a good one, leading to a broad and wide-sweeping investigation.

Last week, VAT investigators all over the country launched the "Golden Nugget" (which, in Hebrew, could also be read as the "Golden Chickpea") operation, backed by representatives of the Income Tax offices and police officers. 

One part of the operation focused on falafels and chickpeas throughout the country with the aim of checking the level of compliance with bookkeeping regulations, recording receipts and the law to reduce the use of cash. A total of 168 reviews were conducted.

In addition, collection and enforcement operations were conducted, looking into 1,661 businesses. Out of those, NIS 120 million was collected from 1,250 of the businesses, and 112 vehicles were impounded until payment was settled.

At the time of writing, seven vehicles were released after those business's debts were settled, while 54 credit foreclosures were carried out, after which most of the businesses came to settle their debt.

Hummus, Tehina, chickpeas. (credit: PASCALE PEREZ-RUBIN)Hummus, Tehina, chickpeas. (credit: PASCALE PEREZ-RUBIN)

"Give me a month or two"

During the operation, visitors arrived at the falafel stand in Petah Tikva. The audit was conducted following a suspicion that the stand owner is not properly reporting his income. After early observations, a control purchase was made, after which the stall owner did not record the purchase anywhere.

After the employees of the Tax Authority identified themselves to him, the owner of the booth said that he keeps a private record at home about his income, and gave incorrect information or refused to answer additional questions.

In another case, in a well-known business selling hummus in Netanya, a search was carried out in the business accompanied by police officers. The numbers in the books of the store didn't add up. 

During the audit it was discovered that there is no cash register in the business. When asked why he doesn't have a cash register, the store owner answered: "Soon I will set up a cash register... give me a month or two."

In yet another investigative case, visitors arrived at a store in Acre while the business owner was not present. His father and the employees at the store refused to cooperate, did not agree to open the cash register, lowered the electricity switch, leaving the Tax Authority representatives to to perform a manual audit only. That, in turn, revealed gaps between the registration of the income and the cash found in the register.

Hummus dish with tahini (credit: PIXABAY)Hummus dish with tahini (credit: PIXABAY)

In all the cases mentioned, the files of those mentioned were transferred for further in-depth audit at the Audit and Assessment Department in the regional VAT offices.

As part of the investigation, another business owner in Petah Tikva was discovered who had a tendency to build up debts he did not repay. After his car was impounded, however, the businessman came to the VAT offices and settled a debt payment of NIS 50,000.