Bar Refaeli Tax Probe Lays Bare Celebrity Wheeling and Dealing

Giving the famous discounts and paying them to appear at events has developed into a big industry in Israel over the last decade – and it’s not only the Tax Authority that’s unhappy.

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Bar Refaeli
Israeli model Bar Refaeli smiles during the Miss Ukraine beauty contest in Kiev, Ukraine, March 31, 2012. Credit: AP
Yasmin Gueta
Jasmin Gueta

You might think the huge sums of money that singers, supermodels and actors earn from their day jobs would be enough. But the reports leaking out about the Israel Tax Authority’s investigation into supermodel Bar Refaeli and her mother, Tzipi, provides a rare glimpse into the widespread practice of granting the rich and famous discounts on goods and services, and cash for showing up at appearances where they are coming simply as noted guests.

People in the public relations and marketing business disagree about how representative the kind of deals Refaeli has allegedly been getting are. She is a rare Israeli celebrity whose fame crosses international borders, thanks to her prior dating of movie star Leonardo DiCaprio and fronting Sports Illustrated’s swimsuit issue in 2009. They also disagree about how effective celebrity cachet is in creating glitzy images for luxury products. But no one denies that the discounts and money for implied endorsements have grown into a business in Israel. And it’s actually so big that the authorities are counting on the buzz surrounding the Refaeli investigation creating a deterrent effect among other celebrities who may have received substantial perks and don’t report them as income, as the law requires.

Refaeli and her mother, who were released last Thursday after two days of questioning, are suspected of lying by claiming that the supermodel is not an Israeli resident, failing to fully account for what investigators say was tens of millions of income earned abroad and how it was taxed. That kind of evasion, if it happened, is not unusual in the world of the wealthy.

But more interestingly, the Refaelis are also suspected of receiving celebrity discounts of more than a million shekels ($257,000) on homes, luxury cars and other items, none of which was reported to the Tax Authority.

For instance, Bar Refaeli received a Range Rover four-wheel drive and a Lexus in exchange for the advertising and public value her driving them would give the importer. In one instance, investigators allege that one contract providing Refaeli with a car, maintenance services and gasoline came in exchange for her agreeing to be photographed with the vehicle and helping with other publicity. Investigators say the cars officially remained the property of the importer for use as a demonstration model, but in practice they were used by Refaeli exclusively so the arrangement gave the supermodel a double benefit: She not only allegedly avoided paying tax on the value of the use of the car, but the fact that she didn’t own it would lend support to her claim that she was not living in Israel. Car ownership is one test the investigator uses to decide whether a taxpayer is an Israeli resident or not.

Illustration.Credit: Amos Biderman

Perks for PR

Refaeli is also suspected of receiving perks in exchange for information and leaks to gossip columns that connected her to property. In one case, her mother is alleged to have bought an apartment on the condition that it would be presented to the public as if the supermodel herself had bought it and was living there. The developer was questioned by the Tax Authority and is said to have admitted that Tzipi Refaeli got a $500,000-shekel discount for having Bar Refaeli listed as the purchaser, explaining that it was good PR for the developer’s company.

The Tax Authority is said to have questioned an executive at a development firm that marketed apartments at Tel Aviv’s luxury Yoo Towers. They said an apartment was leased to Refaeli at no charge, in exchange for a commitment by the Refaeli family for publicity and leaks to gossip columns.

When it comes to granting perks to celebrities, both sides benefit in a cycle that feeds on itself: the suppliers get the publicity, and the celebrities get the perks. Celebrities also raise their profiles by staying in the limelight.

This whole enterprise received a major boost some 10 years ago, when the practice of holding events based on the presence of compensated celebrities first took hold. Today, the practice has become so embedded and widespread that the hottest celebrities have agents who plan their appearance schedules and negotiate the gifts that are to be provided. Public relations offices have staff working full-time to make the arrangements.

“There are [PR] offices whose entire operation consists of sending gifts to journalists and famous people. It’s not professional work with strategic planning. It gives the public relations industry a bad name,” says Itay Ben Horin, a partner in Ben Horin & Alexandrovitz Strategy and Communication.

“Bar Refaeli is now the symbol of the practice, but it’s very widespread,” he continues, recalling the difficulties of trying to stage a product launch built around celebrities appearing and their agents’ insistence that nothing could done unless they were paid. “There’s a price list based on the celebrity’s power and the power of the launch event,” Horin explains.

“When you see a celeb at an event, you know he got something,” says Eran Swissa, a media and gossip reporter for the Israel Hayom daily. “In recent years, it’s not just gifts and discounts, but cash. For attendance at a fashion show, for example, celebrities get 5,000 to 10,000 shekels,” he reveals.

Stars and cars

The industries where the most money changes hands are reportedly real estate and cars, where celebrity cachet at the luxury end of the market can be an important factor in generating sales and image creation. “A person buying in a luxury tower knows he will be so-and-so’s neighbor. The discount [awarded to the celebrity] for that is very high, though not all of them get it,” notes Swissa.

A celebrity purchaser can expect a 5% to 6% discount on the property, and additional discounts on storage space or parking. In return, the developer gets the right to publicize the fact that the celebrity has bought a place at the project.

When Bar Refaeli bought a 400-square-meter (4,300 square feet) unit in Canada Israel’s Blue project on the north Tel Aviv seafront, Barak Rosen – one of Canada Israel’s principals – made sure the news appeared on his website. “Bar Refaeli has also decided to investment in the Blue Tel Aviv project of Canada Israel,” he boasted. His article includes links to news stories about other real-estate sales to the Refaeli family in projects Rosen is affiliated with. One is a link to an item in the Globes business daily about an apartment Refaeli purchased for her brother in 2013 at the Midtown Tel Aviv project. Canada Israel executives declined to comment on any discounts the company may have provided to celebrities, but tax investigators have questioned one of the company’s shareholders.

Some real estate marketers insist that Refaeli’s alleged deals seem to be exceptional. “Usually, developers are not enamored of celebs and are not prepared to pay a lot for them – and, in truth, they’re right,” says one real estate marketer. “Their influence on [other] potential homebuyers turns out to be low.”

When it comes to cars, however, discounts are a stock-in-trade. “You have to understand that there’s almost no such thing as a celebrity who doesn’t get a big discount. It’s pretty much accepted that celebrities get, or are at least offered, major discounts on new cars,” says one former senior industry executive, who asked not to be named. He said the reductions range from 20% for an “ordinary” celebrity to 40% for a top-ranked one.

“The car world is such that discounts are also routinely given to regular customers – so if regular customers get 10% to 15% off the price of a car, famous people get 20% to 30%, and even 40% if it’s a famous person who is really worth it,” he explains.

Arik Mirovsky, Nati Tucker and Adi Dovrat-Meseritz contributed to this report.

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