Israel Fights Against Becoming Tax Haven for Diaspora Jews

Tax Authority plans to exchange information with foreign authorities as part of crackdown on international fraud, agency chief says.

Vowing to prevent Israel from becoming a tax shelter for Diaspora Jews, Tax Authority Director Moshe Asher said his agency plans to exchange information with foreign tax authorities on money held by foreign residents in Israel in return for information from overseas tax agencies on assets held by Israelis abroad.

“Israel will not become a tax shelter for foreign residents,” Asher told a Jerusalem conference of the Institute of Certified Public Accountants on Tuesday.

To move forward with the program, the Justice Ministry is giving to priority to sorting out the legal issues involved in overseas banks sharing financial information on Israeli citizens, he said. The first stage, Asher said, would be seeking foreign institutions to share information on a voluntary basis.

Israel has inadvertently emerged as a tax haven over the past decade under laws designed to encourage aliyah that exempt new immigrants from paying local taxes on their assets or reporting them to the authorities for the first 10 years they are in the country. But in recent weeks, the authorities have been cracking down, raiding scores of homes in Herzliya Pituah, Tel Aviv and Ashdod, where large number of Diaspora Jews have residences, and taking steps to tighten up tax reporting.

Asher said that some of the steps the authority is taking to combat Israel’s tax avoidance include plans restricting the size of cash transactions, hiring new inspectors, stepping up reporting requirements by money changers and defining violations of Israel’s Money Laundering Law as serious crimes.

Turning to another subject, Asher said the Tax Authority supported Finance Minister Yair Lapid’s controversial decision last week to rescind the hikes in income taxes that had been scheduled to take effect in January. “We don’t like it when taxes are raised, we just work to collect them,” he said.

Asher called for legislation that would address distortions in tax rates to promote a more equal sharing of the burden. He estimated that the government will end the year with NIS 6 billion more tax revenues that it had expected, which include taxes collected on so-called “trapped” corporate profits under a program giving companies reduced tax rates if they paid by last month’s deadline. The unexpected increase in tax collections, combined with lower-than-projected spending by ministries this year, was behind Lapid’s decision to call off the tax increases.

Nir Keidar