Tax Authority plans up to 10 years prison for tax dodgers

Moshe Asher
Moshe Asher

A new amendment to Israel's economic arrangements bill classifies all tax evasion as money laundering.

Despite opposition in recent years and the fact that the current Economic Arrangements bill was supposed to be very limited, the Israel Tax Authority has managed to insert several dramatic legislative amendments aimed at combating illegal capital.

The news from the Tax Authority and the Ministry of Finance on taxation is that taxes are not being raised, but collection from aggressive tax planners is becoming more thorough in an escalation of the war on illegal capital and money laundering. "That's where the state treasury will get the money it needs," Ministry of Finance sources say.

Among other things, the recent draft Economic Arrangements bill, which "Globes" has obtained (as of web posting, no final version of the taxation section of the Economic Arrangements bill has been distributed yet), contains an amendment stating that tax violations committed with fraudulent intent (violations under Section 220 of the Income Tax Ordinance) shall be considered predicate offenses under the Prohibition on Money Laundering Law). A predicate offense is an act from which tainted capital (trafficking in weapons, drugs, or women; extortion; etc.) is accumulated.

The meaning of the change is that tax evaders can be accused of under the criminal provisions for money laundering, which carry a more severe penalty (10 years imprisonment, instead of seven).

Another important point is that information will begin to flow from the Israel Money Laundering Prohibition Authority to the Tax Authority, and a long series of sanctions can be applies against tax evaders, the most important of which is confiscation of property obtained through terrorism or money laundering.

The proportion of illegal capital in GDP is estimated at 23%, a figure indicating NIS 50 billion in lost revenues a year. This is the background for the Tax Authority's declaration of total war on tax evasion and money laundering.

For several years, the Tax Authority has been trying have tax offenses included in the Prohibition on Money Laundering Law, but the proposal has been severely criticized by various parties in the economy. The critics say that the Prohibition on Money Laundering Law was designed to combat criminal organizations, and including tax offenses in it will put ordinary citizens and legitimate businesses in the same category as hardened criminals

According to Adv. Anat Tenne, senior and managing partner at Alter Attorneys at Law, a firm specializing in taxation, "This amendment is comprehensive and general. It makes every offense under Section 220 of the Income Tax Ordinance a money laundering offense. This includes many offenses that have nothing to do with money laundering, including cases that are not so serious, in which the prohibition on money laundering is marginal. It is a very grave step to increase the penalty so generally, without any qualifications."

Published by Globes [online], Israel business news - www.globes-online.com - on August 2, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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