Israeli banks urge America clients to close Israeli accounts
Israel banks aiming to avoid conflict with Washington in wake of new U.S. banking regulations.
By Raphael Ahren Tags: Israel news Israel financeObedient to intensifying U.S. government pressure to crack down on offshore tax evaders, in January Israeli banks began ordering clients they identify as "Americans" or "U.S. tax residents" to close investment accounts they hold in Israel. It is apparently an anticipatory measure, ahead of changes in U.S. law. Local banks are apparently responding to changes in American regulations as their legal counsels interpret them.
The Bank of Israel hasn't handed down instructions to the banks on the matter, which doesn't fall under its purview.
In February, for instance, Bank Mizrahi-Tefahot informed clients that as a "result of current U.S. regulations" it can no longer provide "securities services to U.S. persons," and explained the termination procedure. "You are receiving this letter because you are identified in our records as a customer who may be a U.S. person, within the meaning of the applicable regulations," Mizrahi wrote. The letter said that clients who fall into this category have until April 7 to tell the bank how to dispose of their holdings, adding that the bank will continue to provide "banking and non-securities services, including deposit accounts and CDs as well as foreign currency, checking and credit card services".
"If we do not receive your instructions by March 16, 2010, we may liquidate the securities in your account," Mizrahi warned.
Local finance professionals agree that the situation is likely will evolve as the Americans develop and implement new banking guidelines, but differ in their assessment of the possible consequences for U.S. citizens living in Israel.
"Theoretically, any American who has an account here could be affected by the changes," Aaron Katsman, a Jerusalem-based financial consultant who specializes in English-speaking clients, said. "They won't be able to hold stocks. They could have deposits here, but that's about it."
Americans in Israel are left with "with very few options," added Philip Braude, CEO of Beit Shemesh-based financial planning company Anglo Capital Limited. His suggestion: "Take the money back to America. If you're an American you should be investing in America." He agrees that the current situation is murky, with Israeli banks aiming to avoid conflict with U.S. authorities.
"The bank aims to comply with legal and regulatory requirements and constantly reviews the services offered to its clients to adapt them to the changing regulatory environment," Bank Hapoalim spokeswoman Ofra Preuss told TheMarker. She declined to elaborate.
Bank Leumi spokesman Aviram Cohen said that while he could not discuss the bank's customer relations policies, its business decisions are "based on legal standards."
What is not under contention is that American citizens must file annual tax returns with the Internal Revenue Service even if they live abroad, hold dual or multiple citizenships and pay taxes to another country.
While the U.S. has not instructed Israeli banks to close accounts held by American nationals, the IRS is widely expected to ask foreign banks to disclose information about U.S. account holders at some point.
The IRS "does not comment on pending legislation," agency spokesman Bruce Friedland told TheMarker. He said that U.S. citizens may bank in Israel "so long as they appropriately report the existence of accounts, report the income from the accounts and pay the tax on the income generated from the accounts."
Braude, of Anglo Capital Limited, points out that even if the bank is not specifically aware that a particular customer hold U.S. citizenship, that fact would not help them in a court of law. The bank could not argue that it did not know the client was American, he said: Israeli identity cards indicate place of birth, and banks obtain a copy of the document when opening an account.
The problems Americans face in Israel are part of the fallout from a tax evasion scandal involving Switzerland's biggest bank, UBS. In 2008 the U.S. accused the Zurich-based bank of helping wealthy Americans to evade taxes. In response, UBS announced it would stop providing cross-border private banking services to American clients. Last month the Swiss bank UBS agreed to pay $780 million to avoid being prosecuted by the American authorities. It also disclosed the names of some account holders.
It's perfectly legal for U.S. citizens to own stocks outside the U.S., Jerusalem wealth manager Katsman explained. However, he added, many people open accounts abroad for the express purpose of dodging tax payments. "Since the U.S. is desperate to get any kind of revenue possible, because things are tough there and they're running huge deficits, this is one of their ways: to make American citizens either pay huge fines or repatriate the money back to America."
America has a weapon: It could withdraw the licenses of U.S. branches of foreign banks if it suspects collusion in tax evasion.
"Israeli banks have branches in the U.S. and they know [the U.S.] would make it very hard for them to operate if they don't give them the same information that UBS gave them," Nir Amikam, head of research at Wareham Investment Bank, told TheMarker. "I don't know if it makes economic sense, I guess it depends on how much money [Americans have in Israeli banks]," he added. "The banks are probably thinking that it's not as much as they themselves are making by having branches in the U.S."
Finance professionals estimate that U.S. residents hold several billion dollars in Israeli investment accounts.
"The banks here in Israel, and all around the world, just took a business decision: They're not going to deal with Americans having stocks and bonds portfolios here because they don't want to take any risks," an investment advisor in one Israel's leading banks told TheMarker. However, she added, she believes that at present only U.S. residents are directly affected by the banks' decision. Americans living in Israel would not be asked to liquidate their stocks and bonds portfolios, in her opinion.
"We definitely think that in the next two or three years, there's going to come a point when America will stop and declare: OK, we're happy now," said Dylan Shub, principal of Tel-Aviv-based Fortress Capital Management. At that point we'll be able to understand exactly what has to happen and what we need to do."
Since the American authorities have not yet clarified what guidelines they might implement in the future, it is likely that Israeli banks will take further preemptive measures to avoid any conflicts with the U.S. authorities, several finance professionals agreed.
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Binyomin, It's NOT a civil liberty to evade taxes, my friend. If you want to maintain such an autonomy for Israelis, then 1) have them individually renounce American citizenship and 2) detach the banking sector from the American banking sector, lest accounts be frozen, assets seized, and licensed be revoked (in America, where there is jurisdiction over these things). I personally know the educational system in Israel leaves something to be desired compared to the US. The lesson for today, if someone teaches you to say whatever you can to get whatever you want, in most countries that is an indicia of illegality.
Mr Thomas - actually, the Israeli bank doesn't need to see an IRS form. You are earning income from the bank and not the other way around. I would be more than willing to sign a wavier that the bank print out a complete transaction report and send it direct to the IRS. But to disallow me to buy and sell even one stock in a country that I reside in for more than half my life because I happen to have been born in America (and still have a passport)is for sure a form of discrimination. Perhaps the banks will set up separate water fountains for its Ethiopian clients (albeit they also have Israeli citizenship). The whole idea is absurd! That puts me in the position where my life savings earning potential is 1% interest a year at current rates. Moving money back to the states to earn the same 1% a year (maybe)so the gov't can keep an eye on it puts me at risk for the dollar to continue to plummet. Israel has hi inflation because it is successful and growing - so my savings would erode more!
A typical heartbreaking Jewish story.... Where will they get a good return now...?? Eastern Europe,Switzerland or even Germany they all know what to do with Jewish Wealth they have great experience........ What a heartbreaker and such a Dilemma... best of luck
"...perhaps the banks should simply be asked to report an American client`s account to the IRS." The way I read the article, that's exactly what the IRS is doing. And there is no problem unless you try to hide that info from the IRS. And if you do, then the USA can go after your bank for hiding the money. So does your Israeli bank get to see your IRS forms? If not, how will they know what to say to the IRS? If you report it and they don't, they're in trouble. If you don't report it and they do, you're in trouble and they're in trouble. So Israeli banks are working to protect themselves from you until the fix is in. They have the right not to do business with you. No one's civil rights have been violated yet on this issue.
Suonds like a Lebanese/Palestinian soliciting money for Hezbollah?
Whle the CAIR continues it,s dug smuggling operation in Swat.
It,s the damn Palestinians again bleeding the treasury dry by not paying their taxes .
I guess the Avivians better get their taxes "in order". Filing for child rebates in the US, deducting aliyah moving expense as "job moving expenses". Fraud fraud fraud. What a joke.
Taking away the right of someone to invest in securities in your local country of residence because of fear of a foreign government's laws which are NOT applicable in your local country overstep the boundaries of a violation of one's civil liberties and rights - especially in a country like Israel that is trying to promote financial freedom. Israel's financial system is well regulated. And perhaps instead of removing one's rights to invest, perhaps the banks should simply be asked to report an American client's account to the IRS.
maybe the dollar is heading for for a major correction and all of your theories about the motives of this story are way off, or maybe I have to adjust my tin-foil hat
To Chris, Not so, US academia is becoming alarmed at the way they have been manipulated by AIPAC and Zionism in general,could be time for Israel to find a more pliable client state.
The American rule is simple: Americans have to pay taxes on income, but foreign taxes are credited. Example: you work in Britain. You earn GBP 1000, but you are taxed 300. The US tax would have been 305. You pay the IRS 305, minus 300, or GBP 5. That's just the way it is. If you don't like it, renounce your US passport.
They also receive certain tax free saving in Israel for the first 10 years. Olim from the US are much better off financially investing in Israel because of all the savings benefits. I dont see this as being a big problem for Israel & American olim.
Scary---this will make it harder for Americans to invest in Israel and especially to move there. That will make it much easier for the Nazibamas to herd those of us who stand against them into camps rather than let us leave for safer lands. America is soon to fall---how I wish I lived in Israel.
"AIPAC will ensure a little opt out clause for Israel." The odds of an American/Israeli citizen being prosecuted for tax evasion using banking and investment accounts in Israel are about the same as America prosecuting an Israeli spy caught red-handed. IOW, zip and none.
Your article did leave out the most important and real "Information": the USA have no law but only do what they want to achieve their legal or illegal goals. The mean to achieve their goals are absolutely irrilevant.
"Financial professionals estimate that U.S. residents hold several billion dollars in Israeli investment bank accounts." "Which U.S residents" - Wall Street Bail-Out scammers?
What a cynic you are Esther. Is that part of the disease of the left? Can't you get it through your twisted mind that Jews abroad (U.S.,Canada,Brazil etc) love Israel and support a strong country and are proud to be Zionists.. Just because you and your self hating cohorts don't that is your problem. Keep your nose out of the hearts and minds of those of us that love Israel and support her in every way possible. Don't worry the contributions will continue to come forth but always remember they are sent with love and support and that is not directed at the sick left that permeates the country. I am proud to be a zionist..I have no idea what you are proud of.
AIPAC will ensure a little opt out clause for Israel.
Not only that, but if you are a foreigner living and/or working in the US, you are supposed to pay income taxes on foreign income while you are in the US.
What Obama has done is to link the disclosure to the Patriotic Act and thus made it a criminal offence(before it was just a Civil Offence) and as for whether it is good or bad for the US to have roughly 100 Billion in annual revenue loss, due to Tax Havens,I think you will have to have a pretty low paycheck not to spot that one,or a leg in the wrong camp.
Not to be nit-picky, but the impetus for this dates back several years, way prior to Obama, with most of the push coming from congress. Whether it's a net gain or loss for the US, well, that's way above my pay grade.
While All other nationalities: Canadians, British, Dutch, French can and do invest abroad in third world countries and don't get taxed for it (since its foreign income). Americans have to pay taxes on top of the risk they are taking. You know there is a risk to investing in other countries especially if they are developing countries. Foreign taxation discourages Americans from taking foreign risk, and the result: Other countries have a long term advantage, because guess what in the long term, The British, Canadians and French will be more diversified and have more businesses in foreign nations. foreign taxation makes America like a communist country because it discourages Americans from leaving the country and working or investing in foreign nations, so Americans become unaware of what's going on in other countries, Americans also lose their market share in developing nations.
Obama strikes back.
...who purports to provide services to folks who feel, for whatever reason, that they are unjustly taxed. Known him for twenty years, in fact, since he used to do (unrelated) stuff for me in Germany and Switzerland. I say "purportedly" because, being of modest means, I have never delved into the details. No reason to doubt him, though. I could provide his Email and Website, I suppose, but not having any idea what that might ultimately subject me to from a legal liability standpoint, I can only suggest a little imaginative Googling.
... will they continue to support and encourage our settler policy, even after removing the tax-free investments...?