The report of rulings in 2017 by Israel Tax Authority committees published yesterday featured dozens of home owners who rented out their properties. 49 of the 283 rulings by the committees in 2017, almost 20% of the total, involved suspected evasion of taxes on rental income. 42% of the 114 income and land tax cases discussed by the committees involved such cases.
The rulings by the Tax Authority’s committees in 2016 also featured evasion of taxes on rental income. This emphasis results from the campaign against real estate tax evasion declared by the Tax Authority under the leadership of its previous director general Moshe Asher, especially against investors in the housing market.
As part of this campaign, the Tax Authority sent tens of thousands of letters demanding information from residential property owners in Israel in order to find out whether they were evading taxes on rent from their properties. This measure was followed by a wave of arrests in early 2015 and early 2016 of dozens of property owners who were not reporting their income to the Tax Authority.
The file of rulings by the committees reveals concealed income from housing rentals. The players involved are not oligarchs or tycoons; they consist of people working at regular jobs, “small” self-employed people, overseas investors – in short, ordinary people who concealed income ranging from from hundreds of thousand to a few million shekels. It is therefore no surprise to find them mentioned in the report, but not as defendants in long trials. In these cases, the Tax Authority concluded that the cost of a prolonged criminal proceeding outweighs the benefit from it.
According to the tax laws, one of the ways to terminate an investigation into suspected tax offenses is a penalty proceeding, instead of a criminal proceeding. The Tax Authority has formed committees for this purpose that hear income and land tax cases, and committees for VAT, customs duties, and purchase tax cases. The size of the penalty imposed is an addition to payment of the tax in a civil proceeding.
The decision on the size of the penalty takes into account the gravity of the offense, the extent of the suspects’ involvement in the offense, previous convictions, past penalties, their personal situation, suspects’ dependent relatives, the public interest in a trial, rectifying the failure, whether the offense was committed in the performance of the suspect’s job, whether the suspects were working in a sphere requiring trust or fiduciary duty, the need for deterrence in the sector involved, the existence of violations of other laws in addition to tax laws, etc.
The file of committee rulings for 2017 contains 114 income and land tax cases and 169 rulings in customs duties and VAT cases. The rulings include eight cases of failure to report accounts at UBS Group AG in Switzerland. The UBS affair, which culminated in several arrests and interrogation of dozens of Israelis on suspicion of tax evasion through secret accounts at the Swiss bank, was revealed in June 2014 with the arrest of UBS Switzerland investment adviser Roni Elias. He was arrested at the end of a meeting with customers at a luxury hotel in Tel Aviv observed by Tax Authority investigators. Elias made a practice of recruiting customers secretly in Israel for the Swiss bank, with no documentation.
First indictment in UBS unreported capital affair
Searches in Elias’s hotel room turned up a list of hundreds of Israelis with unreported bank accounts in Switzerland, the handling of which he was directly responsible for. The affair resulted in many indictments, some of which are currently in the courts (including an indictment against the former owners of On Clinic, a chain of clinics for treatment of sexual dysfunction).
Some of these cases ended with payment of a penalty in 2017, with most of the amounts concealed in the Swiss bank ranging between NIS 100,000 and NIS 1 million.
Published by Globes, Israel business news – en.globes.co.il – on November 21, 2019
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