14,000 letters sent to tax evasion suspects

Moshe Asher Photo: Eyal Yizhar
Moshe Asher Photo: Eyal Yizhar

The 120,000 warning letters previously sent by the Israel Tax Authority led to collection of NIS 1 billion in taxes.

Israel Tax Authority head Moshe Asher today revealed at an Institute of Certified Public Accountants in Israel conference that 14,000 more warning letters had been sent to taxpayers this week, who are suspected of tax evasion, following the first batch of 120,000 letters. The Tax Authority collected NIS 1 billion in additional taxes following the first batch of letters sent.

The second batch of letters was timed just before the deadline for the voluntary disclosure program, which enables taxpayers to reveal their unreported capital to the Tax Authority without being subjected to criminal proceedings. Now that the deadline is passing, the Tax Authority is making it clear that it will step up its enforcement and exposure measures against tax evasion.

As revealed by "Globes," over 100,000 letters were sent to citizens demanding that they report their income in Israel (Form 5329) as part of a campaign by the Tax Authority's intelligence unit. The purpose of the campaign was to catch all those whose economic operations arouse suspicions of tax evasion, including owners of unreported assets who do not report rental income, citizens frequently flying overseas who are suspected of keeping unreported income or funds there, etc.

The letters were sent to citizens with no files at the Tax Authority about whom cross-referencing of information and other suspicious signs ostensibly indicate that they should have such a file. Of those who received letters, 50,000 own three or more housing units and do not report any rental income, and others frequently flew overseas.

20,000 more letters were sent later, and 14,000 more are being sent now.

Later in the conference, Asher also commented on the third housing unit tax law and Institute of Certified Accountants in Israel head Izhar Kanne's assertion that the law would not achieve its goals, and would increase friction between taxpayers and the Tax Authority.

According to Asher, an app will be launched in January aimed at enabling people to identify one or more housing units on which tax must be paid and how much tax they owe, thereby reducing friction.

Kanne said that he agreed with Asher that there was a distortion in taxes on housing units, but added that the solution was wrong. "The Institute of Certified Public Accountants proposed a solution involving a graduated increase in the tax rate according to income," he stated, adding, "If they want to levy tax, they should apply it to questionable housing units, not to everyone who owns three housing units. The right way is to make it gradual in order to give people time to prepare. Now we will see early fictitious and unnatural transfers from father to son. The law will not last more than a year or two, and as long as it lasts will cause only marginal change, not what was hoped for."

Institute of Certified Public Accountants deputy head and tax committee chairman CPA Jack Blanga said, "The multiple housing unit tax law has not yet been stabilized. In my opinion, in another year, when they begin a general election campaign, we'll hear that every party other than Kulanu will call for eliminating it. This law will not achieve its goals, and we will see two patterns. One is a property issue that the High Court of Justice will soon address. In order to increase one person's property, another person's property is being damaged. Another pattern that must be addressed is the grant to be given according to three conditions: whether the housing unit is sold to someone who does not own housing, and here the Tax Authority has to help provide the information; or to a person buying a better housing unit who undertakes to sell his housing unit within 18 months in order to obtain the grant, and will have to return if he does not. All of these problems make implementing the law difficult."

Blanga added, "The number of housing units that turns income from a housing unit into business income is unclear. There is again a problem here if there is a 2% return, and the home owner has to pay 50% tax + 1% on the housing unit tax, in which case the entire income from rent will be paid in tax.

"This amounts to a fine. If I sell the home and buy offices, no one will tax me, so it is a fine, and someone who gets rid of his home will receive a prize. It turns out that someone buying a third housing unit is penalized. The state is counting on the public's supposed lack of understanding. As soon a home is purchased, it is already worth 10% more than it was before the purchase because of the purchase tax and the payment to the lawyer, so I have to sell it for 10% more than the first investor, and it will therefore take time to get back the difference."

Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Moshe Asher Photo: Eyal Yizhar
Moshe Asher Photo: Eyal Yizhar
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