Why Tax Authorities Don't Want Israelis to Get What They Deserve

State comptroller report shows that the government stands to lose tax revenue if general tax reporting were enacted, so it isn't on the docket.

sharon shpurer
Sharon Shpurer
A street party in Tel Aviv.
A street party in Tel Aviv.Credit: Omer Hecht
sharon shpurer
Sharon Shpurer

Amid the flutter aboutrabbiswith hundreds of millions in untaxed assets and tax inspectors scared to crack down on criminals, no one seems to have noticed an interesting passage from last week’s report by the state comptroller.

“Imposing a general [tax] reporting requirement in Israel would reduce government revenues because citizens would be entitled to refunds they hitherto had not sought,” the comptroller said.

In other words, policy makers at the Finance Ministry and Tax Authority, like those at the Bank of Israel and the National Insurance Institute, aren’t keen to give back money that taxpayers are entitled to.

They worry that if people are required to file tax returns — not just the self-employed but wage earners — they're likely to discover they've been overpaying.

But this isn’t the only reason cited in the report for opposition to universal tax filing. Policy makers are also concerned about the cost of setting up a government apparatus to deal with the problem. According to this argument, universal reporting alone wouldn't reduce tax evasion, it would merely increase friction between taxpayers and the tax authorities.

In the state comptroller’s report, policy makers also say they don’t want to burden the people with filling out forms and dealing with accountants, lawyers and tax inspectors.

So on the one hand policy makers don’t want to trouble the public, while on the other they don’t want to give the public money back it may deserve. And which public is that?

If it were the upper 10% of income earners, the ones with batteries of tax experts at their disposal, officials wouldn’t be concerned about universal tax filing. Taxpayers with accountants and lawyers at their call can get back the money they are entitled to.

Sure enough, while policy makers are opposed to universal filing, tax experts are largely in favor.

Last week, the state comptroller joined their ranks. “There is room for a reexamination of this important matter with the aim of aspiring to increase as much as possible the numbers of people reporting their income to the tax authorities, expand government revenue and ensure social justice,” Joseph Shapira wrote in the report.

Shapira said there is value in universal tax filing, currently the practice in five countries belonging to the Organization for Economic Cooperation and Development — the United States, Canada, Greece, Poland and Hungary.

It would make the process of determining who should (or shouldn’t) be receiving allowances more efficient. It would make it easier for wage earners to utilize deductible expenses and tax credits. It would increase compliance with tax laws and reduce the amount of unreported income, conveying a positive message about the need for everyone to pay their fair share.

But after such a critical report on the Tax Authority, which showed how the authorities are handcuffed when dealing with criminal organizations, rabbis and tycoons, it’s hard to see how universal tax filing will provide a positive message.

It was interesting to hear the treasury’s response to the comptroller’s report. Mickey Levy, the deputy finance minister, said the Tax Authority was having enough trouble recruiting staff to deal with the limited number of tax returns it’s already receiving.

Click the alert icon to follow topics:

Comments

SUBSCRIBERS JOIN THE CONVERSATION FASTER

Automatic approval of subscriber comments.

Subscribe today and save 40%

Already signed up? LOG IN

ICYMI

נתניהו עם כיפה שחורה על הראש נשען בשתי ידיו על הכותל

Israel Is Heading for Its Most 'Jewish' Election Ever

An El Al jet sits on the tarmac at John C. Munro International Airport in Hamilton, Thursday, in 2003.

El Al to Stop Flying to Toronto, Warsaw and Brussels

FILE PHOTO: A Star of David hangs from a fence outside the dormant landmark Tree of Life synagogue in Pittsburgh's Squirrel Hill neighborhood in 2021.

American Judaism Is in Decline. That's Great News for American Jews

Crowds at Israel's Ben-Gurion International Airport, in April.

U.S. Official: West Bank Entry for Palestinian Americans Unrelated to Israeli Visa Waivers

Haaretz spoke with several people who said they had fled Ukraine, arrived in Israel,  and were asked to undergo DNA tests in order to establish paternity.

'My Jewish Grandmother Has a Number on Her Arm, Why Does Israel Greet Me This Way?'

People taking part in the annual "March of the Living" to commemorate the Holocaust, between the former death camps of Auschwitz and Birkenau in Oswiecim, Poland, four years ago.

It’s Not Just the Holocaust. Israel Is Failing to Teach the History of the Jews