Exclusive: France sets up tax dept to investigate Jews

French Finance Ministry Photo: AFP Bernard Guay

The secret department has 20 Hebrew-speaking employees, and is hiring five more to investigate tax evasion.

In Paris's 12th arrondissement, on Bercy Street by the banks of the River Seine, on the 13th floor of the Ministry of Finance is France's tax authority headquarters. Something has been afoot there recently that is liable to upset French Jews and spook their relations with the country in which they live. Under the radar, a secret department has been created with the sole purpose of handling tax evasion by French Jews. "Globes" can reveal for the first time the details of the secret department that is targeting Jews in France and new immigrants from France in Israel.

Sources inform "Globes" that over the past year, the tax authority in the Fifth Republic founded a special department for dealing with French Jews. The department currently has 20 Hebrew-speaking employees, and is in the process of hiring five more. This extraordinary department is one of a kind. Tax authorities do not usually establish departments targeting a specific nationality or religion. The action is astonishing, especially when the country involved is France, which is constitutionally defined as a secular republic that refrains from "marking" people according to their religion. Tax authorities around the world do establish teams to deal with sectors whose tax reporting is questionable. They target a specific market when there is concern that it contains a large amount of unreported capital, such as the real estate market or the diamond market. Setting up a specific department dealing with a designated nationality or religion, however, is not an accepted practice.

The only "department" ostensibly close in character to this secret French department is a new department established in the US Internal Revenue Service (IRS) for dealing with cases of Israelis, American-Israelis, and Americans with assets and money in Israel. This US department, however, resulted from the Foreign Account Tax Compliance Act (FATCA) signed by Israel and the US, in which huge amounts of information are transferred by the countries about their taxpayers, and someone has to handle that information. This was not the purpose for which the department was set up in the French tax authority.

The French department was established to handle French Jewish tax evaders, and hired employees with professional experience and a profound understanding of Israeli law in order to examine whether Jews were using these laws to evade tax in France. The aim of the department is to catch French tax evaders using Israel as a tax shelter.

Examining real estate deals

An international lawyer specializing in taxation who is familiar with the secret department says, "It is very, very irregular to hire 20 Hebrew-speaking employees, or any other language, in a foreign tax authority. Most tax authorities have one or two Hebrew-speakers, and there are English or French-speaking employees in Israel for the purpose of signing conventions and conducting relations with the tax authorities of other countries. Every tax authority has employees that speak a foreign language, but hiring 20 or more Hebrew-speaking investigators is very irregular."

The lawyer adds that he learned from his acquaintance with the department and its employees that some of the employees hired previously lived in Israel. "They hired Hebrew-speaking French people, some of whom previously lived in Israel and moved back to France," he told "Globes."

According to information obtained by "Globes," as part of the department's activity, its employees take out Land Registry extracts in Israel for the purpose of examining deals contracted in Israel and reaching French residents who have acquired properties here. The investigators have mapped the main streets in various cities in Israel, including Tel Aviv, Herzliya, Ra'anana, Netanya, and Jerusalem, in which many purchases by Jewish residents of France take place. They have obtained Land Registry extracts and examined the particulars of a deal in order to detect foreign passport numbers. The investigators cross-referenced the information with information in their databases and the reports by those French Jews about their assets and income. In cases in which it was found that the person did not report the properties he bought in Israel, he was also summoned for questioning.

Sources inform "Globes" that a French Jew recently went to the secret department for an "audit" without knowing exactly what was to be discussed. For safety's sake, he took his lawyer with him - a fact that proved extremely important for him. During the discussion about his declarations of his assets and funds, the questioners very quickly presented a Land Registry extract including all of the French Jewish client's housing units in Israel. The discussion took place, and at the end, the lawyer wondered in what framework the new investigation was taking place. A seemingly innocent casual conversation in the corridor with one of the investigators revealed the amazing fact that a special department for dealing with French Jews and their tax evasion was involved.

Targeting immigrants to Israel from France

Through the special division, in addition to mapping the properties of French people in Israel, the tax authority in France has begun direct interrogations of Jewish residents of France who are in the midst of immigrating to Israel, and examining whether they possess money or assets that they did not previously declare, and whether this is the reason why they decided to immigrate to Israel.

According to figures from the Israel Ministry of Immigration and Absorption, immigration from France has increased dramatically in recent years. 1,211 new immigrants arrived in Israel from France in the first half of 2017. A study conducted at Bar-Ilan University showed that the economic benefit for the Israeli economy from the absorption of Jews from France would reach $65 billion. The study assumes that 100,000 immigrants will arrive from France by 2026.

These figures are surprising to no one. Massive purchases of properties in Israel by French people have been spoken of for years, some by immigrants and some not, and a number of international investigations were opened against French people on suspicion of tax offenses and evasion on an enormous scale in France and laundering money in Israel through real estate purchases. These developments apparently attracted the attention of the French tax authority, which decided to target French Jews.

The sources also told "Globes" that the French tax authority is one of the main tax authorities that contacts the Israel Tax Authority in order to obtain information about French residents with exceptionally large assets in Israel, compared with other countries, but many of the requests are rejected. "They call the Israel Tax Authority almost every day with requests for information about some person or other, but many of the requests are rejected, because they do not meet the conditions of the conventions on exchanges of information. They are just fishing," says a source involved in information exchanges between the two countries.

The French embassy in Israel said in response, "In the framework of the campaign against tax evasion, the authorities in France conduct investigations concerning individual cases, in accordance with the international agreements. The authorities in France deny the existence of a special department. It is extremely important to state that the things that were written are false.

"Taxes in France are calculated according to risk considerations. There is therefore no connection whatsoever to the national affiliation or ethnic origin of taxpayers. Next year, automatic exchanges of information are scheduled between OECD member countries."

Tax experts who represent French citizens and new immigrants from France to Israel were astounded to hear about the new department. They say that the procedure is a new one that is questionable and discriminates against French Jews. In addition, various parties in the Israel Tax Authority were surprised by the details about the division, and said that the matter aroused "feelings of discomfort." Tax experts added that there was nothing else like it anywhere in the world, and that gave rise to questions about selective enforcement, inequality in enforcement, and improper targeting of Jews.

Tax experts speak out

According to Advocate Itay Bracha, a tax expert who represents French clients with the tax authorities in Israel and France, "The procedure is new and questionable, and discriminates against French Jews. The measure is an extremely irregular and rare one, in which a tax authority in a foreign country is setting up a special division to handle Jews, and recruiting an exceptionally large number of employees for it."

Bracha says that there is no similar department other tax authorities anywhere in the world. "I know of no similar department to the one founded in France, and certainly not with that number of employees. There is a special department in the US because of the need for direct communication with the authorities in Israel, and taking into account the volume of trade between Israel and the US, but the main purpose is absolutely not to catch tax evaders." Brac ed in France. This is done through international exchanges of information, or through other means."

Advocate Uri Goldman from the Goldman & Co. law firm, an expert in international taxation and money laundering, says, "French Jewry is indeed wealthy, and it appears that beyond the wave of international information sharing agreements, the local tax authorities in each country are trying to act independently to trace tax evaders by themselves, without relying on information from the corresponding authority in the other country." Goldman nevertheless adds, "Although it ostensibly involves enforcement on the basis of wealth concentration and economic rationale, the focus on the Jewish community in France has the bad odor of national or political motives." He adds, "Segmenting and other cross-sectioning not based on nationality or religious affiliation can be used to trace wealth."

Goldman notes that new immigrants in Israel are exempt from tax reporting and payment of taxes for 10 years, but among wealthy people and owners of companies and other assets in France, the matter is more complicated. "When the immigrant is wealthy, there is a complex situation of adjustment between tax law in Israel and overseas through the tax conventions. This is particularly true in view of the war against unreported capital," he says. There are also those trying to calm things down before a conflagration takes place." Pearl Cohen Zedek Latzer Baratz partner and Tel Aviv international tax group chairperson Advocate Henriette Fuchs mentions that the phenomenon should be seen as part of the new era in the war against unreported capital. "In many countries, the tax authorities and the authorities in the war against money laundering have assigned special groups to keep an eye on specific sectors in the market and groups of taxpayers. In Israel, Fuchs says, "The head of the Israel Tax Authority himself traveled to Switzerland in order to reach tighter arrangements with Switzerland for the purpose of preventing the holding of illegal funds belonging to residents of Israel." ha added, "Such a department, which constitutes extreme discrimination against Jews in France, does violence to equality between different citizens. Establishing such a department is an unacceptable statement by the authorities in France, and puts the Jewish community in a very unflattering spotlight."

"Globes": What about the immigrants from France?

Bracha: "At the present time, in contrast to the prevailing opinion in the French community, the announcement by French Jews that they are leaving and immigrating to Israel does not solve the Jews' problem. On the contrary; this act put the immigrant in the spotlight, and the authorities in France start an investigation into his case in order to detect whether he has money and assets in Israel that have not been reported in France. This is done through international exchanges of information, or through other means."

Advocate Uri Goldman from the Goldman & Co. law firm, an expert in international taxation and money laundering, says, "French Jewry is indeed wealthy, and it appears that beyond the wave of international information sharing agreements, the local tax authorities in each country are trying to act independently to trace tax evaders by themselves, without relying on information from the corresponding authority in the other country." Goldman nevertheless adds, "Although it ostensibly involves enforcement on the basis of wealth concentration and economic rationale, the focus on the Jewish community in France has the bad odor of national or political motives." He adds, "Segmenting and other cross-sectioning not based on nationality or religious affiliation can be used to trace wealth."

Goldman notes that new immigrants in Israel are exempt from tax reporting and payment of taxes for 10 years, but among wealthy people and owners of companies and other assets in France, the matter is more complicated. "When the immigrant is wealthy, there is a complex situation of adjustment between tax law in Israel and overseas through the tax conventions. This is particularly true in view of the war against unreported capital," he says. There are also those trying to calm things down before a conflagration takes place." Pearl Cohen Zedek Latzer Baratz partner and Tel Aviv international tax group chairperson Advocate Henriette Fuchs mentions that the phenomenon should be seen as part of the new era in the war against unreported capital. "In many countries, the tax authorities and the authorities in the war against money laundering have assigned special groups to keep an eye on specific sectors in the market and groups of taxpayers. In Israel, Fuchs says, "The head of the Israel Tax Authority himself traveled to Switzerland in order to reach tighter arrangements with Switzerland for the purpose of preventing the holding of illegal funds belonging to residents of Israel."

Published by Globes [online], Israel Business News - www.globes-online.com - on December 28, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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French Finance Ministry Photo: AFP Bernard Guay
French Finance Ministry Photo: AFP Bernard Guay
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