The Tax Cheat: Hero or Villain?

While most Western countries scorn tax evaders, Israelis tend to tolerate or even support them - hence the Knesset's refusal to crack down.

For his role in the arrest of the notorious Chicago mafia kingpin Al Capone on charges of tax evasion, U.S. Treasury Department agent Eliot Ness became a celebrated folk hero. He would later be portrayed by Kevin Costner on the big screen.

Israel doesn't have its own Eliot Ness and probably never will, because the last thing the Israeli public would ever idolize is a dauntless tax agent.

On the contrary, Israeli society detests tax investigators and hopes they utterly fail at their task for one trite reason: Israeli culture doesn’t view tax evasion as a crime.

"Changing the approach taken by the Law Prohibiting Money Laundering from a law addressing the laundering of money gained from particularly serious cases of organized crime or terrorist activity to a law dealing with less severe financial crimes requires amendments for maintaining the rights of the accused and a balance in enforcement," the Knesset said this week in response to our query as to why it refuses to debate a bill defining severe tax evasion as a money-laundering offense. The reply from Israel's legislative body speaks for itself: There are serious crimes, like those involving terrorist organizations or the mob, and there are less serious crimes like tax evasion – and the two mustn't be lumped together.

It's safe to assume almost all TheMarker readers agree with the Knesset's statement. Tax-evading plumbers shouldn't be subject to the same set of laws as drug dealers, right? From the Israeli perspective, it is perfectly obvious that a tax cheat isn't a major criminal – or a criminal at all for that matter. Our hearts almost go out to the plumber who can't make ends meet and who has no way of making a living except by working "under the table." We don't hesitate to join in with our own minor evasion by dispensing with the receipt and sidestepping the 18% value-added tax. The plumber, for his part, avoids paying income tax or company tax on the amount we pay him.

Since we're all partners in this day-to-day tax evasion conspiracy, we're also convinced that cheating on taxes is normal behavior. We even feel it's morally justified: Israel is corrupt; the taxes the state collects from us go into the pockets of settlers/Haredim/tycoons/labor unions, and therefore it's only fair and decent to cheat the state out of taxes. There's a saying in Hebrew that goes: A person stealing from a thief isn't held liable.

But we tend to forget that we're still thieves, and not just any thieves but the worst and most despicable kind. The Law Prohibiting Money Laundering will treat anyone cheating an insurance company with the help of a falsified document as a major criminal and money launderer and will bring the full force of the law against him. But anyone cheating the State of Israel by using a falsified document – a falsely-stated income-tax return, fictitious invoices or the setting up of dummy corporations, for example – won't be considered a criminal by the law. And anything he does to hide his ill-gotten money won't be considered money laundering.

If this seems natural, consider this: Not only do Americans view tax cheats as criminals and money launderers, they view them as comprising a particularly horrendous category of criminals. This is because cheating an insurance company is merely stealing from wealthy business barons, whereas cheating the government means stealing from the financial aid provided to widows and orphans – the weakest elements of society.

In American terms, and those of most Western countries (except perhaps Italy), there is no doubt that tax evasion is an extremely serious criminal and social offense. The tax-cheating plumber isn't seen deserving of mercy in the eyes of Americans; he's seen as deserving to be sent to prison, exactly like the head of the Chicago mafia. This is probably one of the reasons that the rate of tax evasion in the U.S. is estimated at 9% as opposed to 23% in Israel.

This 23% translates to about NIS 230 billion hidden from the tax authorities each year, meaning NIS 55 billion to NIS 60 billion in lost tax revenues. This isn't counting the damage from excess allowances received by people who make their money under the table and don't report it. In other words, the State of Israel loses by way of the underground economy its entire defense budget or a quarter of all its annual revenues. This means 25% less for the education budget, 25% less for medicines, 25% less for assistance to the needy and 25% less for cultural activities.

This is a country working at just 75% of its capacity and, with the heavy security burden, a country where services rendered its citizenry will forever be substandard and deplorable and people will always have good reasons to take to the streets in protest. It can be assumed that in every social justice demonstration the people will be protesting the corrupt regime and crooked politicians. The people are obviously right: The face of the government resembles the face of the nation. The people are crooks, and so are their rulers.

AP