"Tax planning is organized crime for all intents and purposes," outgoing Israel Tax Authority director general Doron Arbeli told "Globes" in an interview. "If you want a war against black capital, it's not enough to cry about it. Income tax debt is debt to the state, to every citizen. It's illogical for someone to travel abroad every other day, drive a luxury car, but not pay his debts. We want the ability to delay foreign travel. This does not need legislation."
"Globes": Where exactly is the black economy?
Arbeli: "Everywhere. There is no sector where we haven’t found tax evasion, crime, and tax fraud. There is no sector where this does not exist. I know this from the work of the enforcement team, the war against black capital, and from my experience accumulated over the years.
In the financial sector, the banks, and the capital market?
"I don’t want to get into that, partly because I am bound by confidentiality. In principle: everywhere. I can unequivocally say that tax evasion in Israel is so severe and worrying that the time has come to do something, because of the scale and the norm it creates."
You're aware of the general feeling that it's OK to screw the tax authorities.
"I don’t want to live in such a country. I don’t want to live in a country where that is the norm. The question now is what to do about it. Let's talk numbers: I estimate that the annual turnover of black capital in Israel is NIS 50-60 billion. This means NIS 10-12 billion in lost tax revenues. These are estimates and hunches, and a lot more. 80% of these amounts are aggressive tax planning and organized crime."
You're linking tax planning and organized crime.
"Yes and more; this is where the big money is. I link these two sources even though aggressive tax planners aren’t necessarily classified as organized crime. I link them because that's where the money is. When we handle an organized crime case in fuel, we're talking about fictitious invoices over 3-4 years and NIS 5 billion in taxes. In just one case! Go out and learn the significance of the total amount of tax revenues lost every year, and what could be done with them. Aggressive tax evasion is organized crime. In many cases in different sectors, we find hundreds of millions of shekels in aggressive tax planning."
The Knesset created trapped profits
People hear Deputy Minister of Finance Yitzhak Cohen telling the Knesset, "The average tax rate paid by the top 1% of Israel's best companies was just 2.9% in 2009 and 3.3% in 2010." They then hear that you support huge discounts on trapped profits assessments. So why should ordinary people pay the full tax?
"I asked the members of the Knesset Finance Committee, 'Tell me why you approved this? These laws require your signatures. Why did you vote in favor of the Law for the Encouragement of Capital Investment, when you could have known that companies pay a 6-12% tax rate or less? The Tax Authority didn’t create the Law for the Encouragement of Capital Investment; the Knesset did, the government, which sought to promote investment, create jobs, and bring in money. And you thought this was good.' This is the public's money, but you nonetheless conceal the names of the corporations paying this pitiful tax rate.
"Please, abolish the secrecy in tax laws. We are forbidden to disclose information, the law forbids us from disclosing which company pays, and how much. Besides, some of these companies are public companies, which report to the TASE. Go read these companies' financial reports and you will know exactly."
There is a feeling that a 500-page statement is partly intended to conceal figures.
"Fine; we've just returned to the start of the conversation, and our demand for transparency in tax opinions. We also have to wade through 500-page statements to find the tax planning."
Would you change the tax breaks in the Law for the Encouragement of Capital Investment?
"I don’t know. I think that this should be examined, considered, and other mechanisms found to encourage investment."
How much have you promised to bring to the budget from trapped profits?
"NIS 3 billion in 2013. The companies already know that there are two sides here. If no directives are issued and they don’t pay up, we'll assess them and they'll have to deal with us.
But most of the so-called trapped billions aren’t here any more. They are in real or fictitious foreign subsidiaries, in interest-bearing deposits overseas. What are you threatening them with?
"We also remember that public companies have to file prospectuses, quarterly and annual financial reports, as well as current notices to the TASE. If companies included in the trapped profits do not comply with the directive, we will assess them, and they will be found liable under the Securities Law, to notify the TASE about this. I'm not sure that they will want such a stain in their reports."
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2013
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