Tax evasion to become money laundering offense

The move means much stiffer penalties, and shared information among enforcement agencies.

One of the most obscure items in the package of fiscal measures to be brought before the government next week is the one called "deepening collection." According to Ministry of Finance and Tax Authority calculations, this little item will bring in the huge sum of NIS 2 billion.

Sources inform "Globes" that behind this item lies legislation comprising 29 sections that will radically change tax debt collection in Israel.

The main section of the legislation, currently being drafted by the Tax Authority and the Budgets Division, proposes that tax evasion should be recognized as an "original offense" under the Prohibition of Money Laundering Law. An original offense is the transaction by virtue of which the tainted capital is amassed. The significance of the change, for which the Money Laundering Authority has battled for years, is that it will be possible to indict tax evaders under the penal clauses of the Prohibition of Money Laundering Law, which contain very severe penalties.

The change also means that information will flow from the Tax Authority to the Money Laundering Authority.

The Money Laundering Authority has been demanding this unification for a long time, but senior people in the Tax Authority opposed it. A former senior Tax Authority official told "Globes" that this was a lethal weapon that reflected the spirit of the time and was liable to bring about a "Big Brother" syndrome in Israel. "You must also know how not to give an authority too much power," he said. On the other hand, members of the committee that drew up the proposals argue that without greater powers and without a real war on illegitimate capital in Israel, there will be no avoiding tax hikes that mostly hurt the weaker classes.

"Globes" has also learned that another important section of the legislation being formulated gives debt seizure powers of the Enforcement and Collection Authority in the Ministry of Justice to the Tax Authority. The current powers of the Tax Authority under the Income Tax Ordinance to enforce and collect debts are considered too weak, even after someone has admitted that they owe taxes. The new measure will make it easier for the Tax Authority to collect debts.

The National Accounts of the State of Israel for 2011, published two weeks ago, show that Israeli citizens owed the Tax Authority some NIS 21.5 billion (about 10% of total collection that year), a figure similar to that for the previous year (NIS 20.5 billion). The Ministry of Finance points out that these are not debts that have been written off, but debts that are being dealt with, but are hard to collect.

Published by Globes [online], Israel business news - www.globes-online.com - on July 25, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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