Legislation that would have required new immigrants and returning Israelis to report their foreign income and assets will not be included for now in the supplementary legislation to the state budget, after Immigrant Absorption Minister Zeev Elkin expressed opposition to the proposal.
Despite intensive talks on Wednesday between representatives of his ministry and the Israel Tax Authority, which has been pushing for the amendment to the tax law, a decision was made not to submit the proposal to a scheduled vote tomorrow by the special ministerial committee on the 2015-16 economic program.
The tax agency, which has been cracking down on foreign-earned income and assets, is still determined to win passage of the amendment, if not through the Economic Arrangements Bill then with a dedicated bill.
News about the proposed legislation this week had already presumably given pause for many returning Israelis and potential immigrants. Under current legislation dating back to 2008, both groups are exempt from reporting income or assets for 10 years after immigrating or returning to Israel.
“I was just in South Africa and I heard from not a few families that they are deciding between moving to Israel or to Britain because British tax authorities grant an exemption from reporting income and assets overseas. It’s not logical from their perspective to come to Israel,” said Avi Nov, a lawyer specializing in international tax regulations.
Nov said that if Israel does ultimately do away with the exemption, some potential immigrants would move up their arrival date before the new rules take effect.
The exemption was part of an effort to encourage more immigration from Western countries, but tax officials say it has been exploited in many cases to evade taxes. Returning Israelis have to be living abroad for at least a decade to qualify.
The amendment would preserve the two groups’ tax-exempt status but it would entitle tax inspectors to get information on assets and income-generating activities abroad. It would include disclosure by companies’ controlled by new immigrants and returning Israelis and from trusts they set up. It would only apply to those immigrating or returning from January 2016.
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