C'tee calls for limiting cash deals to NIS 7,500

The Locker committee recommends a series of restrictions on the use of cash and checks.

The Locker committee examining the use of cash in the Israeli economy, headed by Prime Minister's Office director-general Harel Locker, published its interim recommendations yesterday, setting out policies for reducing and restricting cash transactions. The main aims are combatting black-market capital, deepening tax collection and expanding the tax base, and combating economic crime and money laundering. The committee's final recommendations are due to be published shortly.

The main recommendation in the interim report is an immediate restriction on the size of a deal that can be transacted in cash between businesses to NIS 7,500, with the amount falling to NIS 5,000 after a year. The committee also recommends restricting the size of cash transactions between private parties to NIS 15,000. Carrying out cash transactions in excess of the maximum amounts will be a criminal offence subject to an administrative fine. According to the recommendations, transactions for higher amounts will be carried out using checks, bank transfers, debit cards, and identifiable electronic wallet cards.

The law currently restricts cash transactions between businesses only, to NIS 20,000.

The committee also recommends several restrictions on the use of checks. Initially, there will be a restriction on paying a check that has been endorsed more than once, at first to a maximum amount of NIS 7,500, and later to a maximum of NIS 5,000. Eventually, all negotiation of checks will be banned, as will issuing or receiving a check with no payee, and check transactions will be limited to NIS 1 million.

Estimates that the black economy in Israel amounts to 22-23% of GDP were the main driver behind the Locker committee recommendations. This represents huge amounts of money of which the public purse is deprived. Committee chairman Harel Locker told "Globes" today, "Black money in Israel has reached dangerous proportions, and cash is the fuel of the black economy and of organized crime. We want to reach the situation of Western countries, where the black economy is estimated at 10% of GDP, which means closing a gap of 10-15%. This translates into NIS 40-50 billion shekels more for the state. That is the size of the budget of the health system, or approximately the size of the budget of the Ministry of Education, or the shekel budget of the Ministry of Defense. It's a huge sum. Think by how much we could reduce VAT, and what potential there is for future tax cuts.

"Today," Locker added, "for every shekel in tax collected from a salaried worker, a shekel is concealed. If the recommendations are implemented, it will lead to more equitable sharing of the burden. In a country like Israel, we can't afford a situation in which huge sums of money are spirited away and the burden falls on a small number of people. When the recommendations are implemented, money that was black money will go to the state's coffers and we will be able to direct it to education, health, infrastructure and welfare"

Locker says that the threshold set allows for the normal business transactions of most people. "We don't want to harm normal business activity of law-abiding citizens, so we set the threshold at NIS 5,000. When does the average citizen carry out a NIS 5,000 transaction in the course of everyday life? How many transactions like that are there? Above this threshold, something is suspect. In practice, a huge percentage of the everyday transactions of most people is not caught by the recommendations. We are talking about a very small proportion."

Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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