Tax Authority Turns to London Bankers to Locate Israelis' Hidden Assets

Authority estimates Israelis hold tens of billions of dollars in London banks, most of which is reported

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A worker walks past office skyscrapers in the City of London financial district, London, Britain, January 25, 2018.
A worker walks past office skyscrapers in the City of London financial district, London, Britain, January 25, 2018.Credit: \ TOBY MELVILLE/ REUTERS

The director of the Israel Tax Authority, Moshe Asher, met with British bankers in London last week to enlist their help to locate money held locally by Israelis.

While the tax authority believes most Israelis report their holdings, a significant amount remains unreported, based on an estimate that they hold collectively tens of billions of dollars in British banks. Asher and his deputy, Miri Savyon, presented to the bankers its relatively new regulation on voluntary disclosure. They asked the bankers to help them inform relevant clients.

Asher met with Swiss bankers in 2014, during the initial period of the previous regulation on voluntary disclosure, to encourage them to alert Israeli customers that they need to report.

A demand by Swiss banks that their Israeli clients report their accounts in Israel contributed to a high level of compliance by Israelis, who reported an estimated 30 billion shekels ($8.6 billion) in capital holdings under the previous regulations. The response also came against the backdrop of reports about Switzerland’s UBS bank scandal, in which indictments were filed after the tax authority received a list of accounts in Switzerland. The tax authority can only hope for similar results in London banks.

Under the previous regulation, which went into effect in late 2014, a total of 7,549 disclosure requests were filed. The expected amount of taxes expected to be levied after examining the requests is about 10% of the amounts reported, or about 3 billion shekels. Diamond traders, who eventually were also allowed to disclose their holdings according to the regulation, gave a final push to the total amount reported.

The most significant catalyst to reporting under the new regulation is expected to be the Common Reporting Standard, which was developed and approved by the Organization for Economic Cooperation and Development Council to help with tax enforcement. Israel has announced it would adopt the standard, which is supposed to go into effect in September, or later depending on how long it takes to prepare for the new regime and for countries to amend their legislation and rules.

In line with the new standard, Israeli financial institutions such as banks and insurance companies, will first identify account holders. They will pass on data regarding accounts held by foreign residents to the tax authority, which in turn will automatically forward the data, which includes deposit and balance information, to foreign authorities each year.

The Common Reporting Standard relies in great part on the FATCA reporting model that the United States has signed with many countries, among them Israel, which requires banks abroad to provide the Internal Revenue Service with information about its customers who are U.S. citizens.