The Israel Tax Authority said Monday it had begun passing on data on Israeli bank accounts held by American citizens and Green Card holders since August as part of an expanding crackdown on tax evasion.
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The authority did not disclose how many accounts were involved but said the U.S. Internal Revenue Service had given it data on more than 35,000 accounts held by Israelis at U.S. banks and financial institutions. It said it was now poring through the information on the lookout for tax cheats.
“The tax authority will be examining and sorting the data, and comparing it with reports Israelis made to the local tax authorities,” it said in a statement. “The process will identify which [bank] clients have been regularly reporting to the authorities about their accounts and which have taken advantage of the tax amnesty.”
While Israelis are allowed to hold foreign bank and investment accounts, they are required to file annual statements about the size of their assets and income they generate from interest, dividends or capital gains.
The exchange of information between the United States in Israel comes after Israel agreed to abide by America’s 2010 Foreign Accounts Tax Compliance Act, popularly known as FATCA, which requires foreign financial institutions to supply information to the U.S. tax authorities. Israel agreed to comply with FATCA three years ago and the agreement went into force in August.
The exchange of information between Israel and the U.S. tax authorities is just the beginning of a wider crackdown on tax evasion being orchestrated by the Organization for Economic Cooperation and Development, the club of most of the world’s developed economies.
The OECD’s Common Reporting Standard, which sets a standard for the automatic exchange of information among national tax authorities, is being adopted by Israel, too.
Countries using the Common Reporting Standard will be able to exchange information on taxpayers’ bank accounts, balances and financial income more quickly and efficiently.
The Israel Tax Authority said it is now preparing a final version of the Common Reporting Standard for Israel that will soon go to the Knesset Finance Committee for approval. Based on FATCA, it will require financial institutions to be ready to provide information according to the CRS system by September 2018, covering the 2017 tax year.
In November, Israel and Switzerland, a haven for what Israelis call “black capital,” agreed to begin sharing information on financial accounts automatically in 2019.
The Israeli government has also been campaigning to stop tax evasion. A two-year-old tax amnesty that ended December 31 gleaned billions of shekels in back taxes, and last March the Knesset passed legislation imposing the same severe penalties for serious tax violations as the law does on money laundering. It also entitled the Anti-Money Laundering Authority to share information with the tax authority.