Taxman Tuts, Doesn't Act Over NIS 85 Billion Debt

Courts won't let bailiffs do what's necessary to collect, Tax Authority rebuts inefficiency claims.

The state was owed NIS 82.9 billion in unpaid taxes at year-end 2009, a tremendous amount that, as time passes, is increasingly unlikely to be collected, writes the state comptroller.

Of that amount, NIS 51 billion could be collected by confiscating and selling the debtors' assets. But the Tax Authority is not exploiting its collection procedures in a timely manner, says State Comptroller Micha Lindenstrauss. By nature, the more time passes the less likely any debt is to be collected.

While empowered to sell land belonging to people who refuse to pay tax, the Tax Authority doesn't do so, the comptroller wrote. Its regional offices don't even have lists of debtors with assets that could be seized and sold, and never analyze the results of previous attempts to confiscate assets.

The Tax Authority sends warning letters to debtors but doesn't reliably follow up with enforcement. It also sometimes sends bailiffs to wrong addresses, the report states. Nor does it have orderly information on debts to sub-units such as betterment tax, sales tax, Customs and VAT.

Also, tax collectors avoid going to some areas almost entirely for fear of physical assault.

The upshot, writes Lindenstrauss, is loss of deterrence and inequality before the law.

The Tax Authority commented that it does its utmost to improve collection. It also said that in 2010 it collected NIS 195 billion, which was NIS 12 billion more than it had been expected to bring in, "an achievement that cannot be taken for granted." The achievement is partly the result of "tremendous investment in enforcement" of current payments and outstanding balances, amounts, the authority said.

It also said that court rulings have prevented bailiffs from taking measures they used to take to collect tax debts.

In another section of his report released yesterday, Lindenstrauss wrote that the Tax Authority continues its practice of promoting unqualified people to high positions. Also, the tax commissioner has sole say in appointments - without exercising clear criteria and without transparent tender processes.

The Tax Authority rebutted that it adheres to the rules governing the civil service, the law and rulings from the courts.