Money Earned From Prostitution Is Taxable, Court Rules

Of NIS 242,000 seized in prostitute’s apartment during drug raid, judge gives more than half to taxman.

Revital Hovel
Revital Hovel
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Revital Hovel
Revital Hovel

Putting a new spin on the inevitability of human frailty and taxes, a Tel Aviv District Court judge approved the seizure of money from a prostitute’s apartment last week, following claims by the Tax Authority that she had not paid tax on it.

Last February, police searched the apartment of N., a prostitute, on suspicion of drug possession. During the search, they found NIS 242,400 in cash. N. said that the money was savings that she had earned by working in prostitution for about seven years and that she earned roughly NIS 3,500 per month. In court, she testified that she was the “other woman” of several men who were steady customers.

Following N.’s testimony, Tax Authority officials demanded that she pay tax on the money she had earned over the years, which she never reported. Since she did not pay, the State Prosecutor’s Office asked the court to order half the money seized.

Under questioning, N. said that her customers paid her expenses — rent, bills, trips to Eilat and abroad, food and clothing — and that she charged each customer NIS 300 per session.

Her attorneys told the court that the money the men had given her should not be treated as taxable income, but rather as a gift or as joint income, which are tax-exempt, since she served as a “mistress” for each of the men.

They claimed that the assessment had been “inflated” and did not take realistic living expenses or N.’s business-related expenses into account.

Judge Yona Ettedgui ruled that the money N. had received from the men was taxable income, rejecting the argument that it should be considered a gift. He also ruled that taxes must be paid on N.’s expenses, which were covered by the men, “since received income that has monetary value is considered taxable income.” Judge Ettedgui added, “The fact that the defendant’s income is derived from an occupation of dubious legality or morality does not exempt her from paying tax on it. This was decided in a ruling about income that was clearly illegal, and that ruling must be followed regarding the defendant’s income, which is theoretically legal, but perhaps immoral.”

Israel’s Tax Authority demands that illegal activity be taxed, but when it comes to escorts and prostitutes, Judge Ettedgui’s ruling is an unusual measure.

The judge said that there was already the precedent of an escort service owner who kept accounts of his business. But he did not go into the issue of whether N.’s income required bookkeeping, saying that the amount of unreported income was enough to decide the question of whether to approve the seizure of the funds.

A prostitute near the old Tel Aviv central bus station.Credit: Nir Kafri

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