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Treasury Accuses IDF of Tax Evasion

The Finance Ministry claims that the lack of transparency in the defense budget foils all attempts to cut it or demand efficiency.

Finance Ministry officials accused the Israel Defense Forces of taking advantage of its lack of budgetary oversight in order to overspend and evade taxes, amid a heated meeting on Prime Minister Benjamin Netanyahu's plan to cut the defense budget yesterday.

This is the first time that treasury officials have openly made these accusations.

Money, Currency, Shekel - Reuters - 29.8.11

The Finance Ministry claims that the lack of transparency in the defense budget foils all attempts to cut it or demand efficiency, since there's no way of knowing how much money the defense establishment actually spends, or whether cuts are actually being carried out as promised.

The defense budget is being considered as a funding source for the social programs being proposed by the committee headed by Prof. Manuel Trajtenberg.

The Finance Ministry wants to see NIS 3 billion cut from the 2012 defense budget, which is currently more than NIS 55 billion; the committee is likely to recommend cutting between NIS 1 billion and NIS 3 billion.

The defense establishment has demanded a larger budget.

Netanyahu was expected to decide on the issue after press time last night.

Creating full oversight and transparency regarding the defense budget is more important than a budget cut, said finance officials.

The Defense Ministry is the only ministry that manages its budget without any civilian oversight, they said.

It manages its accounts with a separate computer system in the name of security, but even the Mossad and the Shin Bet security service use the regular treasury accounts system, the officials noted.

The IDF had agreed to let the treasury audit its salaries a year ago, but that audit was halted after it discovered irregularities regarding usage tax that officers paid for army-issued cars.

Employees who receive cars from their employer - in this case, the IDF - pay income tax based on the assessed value of the car's use. Since the IDF was the party paying the usage tax, it was essentially giving itself a tax discount, and thus enlarging its own budget.

The Defense Ministry argued that taxes were being paid in keeping with an agreement between the IDF and the treasury.