Ex-PM Olmert Told He Owes Millions in Taxes for Donations to His Legal Defense

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Former Prime Minister Ehud Olmert at a business conference in Jerusalem in 2020.
Former Prime Minister Ehud Olmert at a business conference in Jerusalem in 2020.Credit: Tomer Appelbaum

The Israel Tax Authority is demanding former Prime Minister Ehud Olmert pay millions of shekels in taxes on donations he received to fund his legal defense years ago.

The Tax Authority believes at least some of the funds were not given as gifts, but in the hope that Olmert would return to public office. Olmert, who is formally disputing the claim, says the donors were close friends of his so that their financial assistance should be viewed as tax-exempt contributions. If the Tax Authority rejects his claim, Olmert is expected to appeal the decision in court.

When he was being investigated and stood trial, Olmert received dozens of contributions from wealthy donors in Israel and abroad. For the most part, the contributions were put into a trust account managed by his attorney and friend Eli Zohar. The donors were asked to declare before attorney Pini Rubin that the contributions came from their own funds, were solely intended to finance Olmert’s legal defense and that they had no business connection with Olmert. The funds were used to pay the lawyers representing the former prime minister.

One of the most prominent donors was the American billionaire S. Daniel Abraham, who also bought Olmert’s house in Jerusalem. Abraham routinely donated money to Israeli politicians like Shimon Peres and Ehud Barak, as well as to left-wing nonprofit organizations. Another prominent donor was the Israeli auto importer and real estate and shipping magnate Rami Ungar who, according to his police testimony, contributed 3 million shekels ($910,000 at current exchange rates) to Olmert’s defense. Ungar used to be close to former president Ezer Weizmann and more recently his name has been linked with former Mossad chief Yossi Cohen.

Last year, the Tax Authority opened a review of the donations to Olmert. But because a statute of limitations applies to most of them, the government’s demand for back taxes currently only applies to 2014 (and he may be later assessed for taxes on donations he received in 2015 and 2016).

For Olmert, 2014 was an eventful year on the legal front. After being convicted of accepting a bribe in the Holyland housing project case, he appealed the decision to the Supreme Court, which ultimately exonerated of the main charge while letting his conviction for accepting a bribe from Shmuel Dachner stand. The same year, he was also investigated on suspicion of obstructing justice, after his bureau chief, Shula Zaken, gave the police recordings in which Olmert was heard urging her not to testify against him. In those conversations, the former prime minister promised Zaken that Ungar would take care of her financially, though Ungar denied that he ever agreed to do that.

People close to Olmert said there was no reason he should be liable for taxes on donations from friends that never passed through his bank account, especially considering that no such demand has ever been raised regarding similar cases.

One of his confidants even speculated that the case has to do with the harsh criticism Olmert leveled at former prime minister Benjamin Netanyahu in April. “He also thinks the tax assessment, which relates to events that took place years ago, isn’t a coincidence,” the confidant told Haaretz.

Arye Dery and Tzachi Hanegbi, who were indicted on corruption charges while serving as Knesset members, received contributions for their defenses via funds and nonproft organizations that were set up for them. Neither of them is believed to have ever been asked to pay taxes on the donations. Olmert himself didn’t pay taxes on the donations he had received at the end of the 1990s as a Knesset member and as Jerusalem mayor, when he stood trial for the fictitious invoices’ scam in Likud, for which he was acquitted.

The Tax Authority’s stance on the Olmert donations could have implications for Netanyahu as well. As prime minister, Netanyahu asked several times for donations from Spencer Partrich and his cousin Nathan Milikowsky, two American tycoons who are close to him. The State Comptroller’s Office denied the requests, terming them perks forbidden to office holders. Now, as a rank-and-file Knesset member, Netanyahu can freely solicit donations, but a confidant of Netanyahu said he didn’t believe he was planning to do so.

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