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Jan 7th, 2014
The traditional tax havens in Europe have suffered from the ongoing erosion of bank secrecy laws and other events (such as the theft of bank data) in recent years. Recent developments will have an impact on Israel as well, as indicated in the report reproduced below from i24news (an international 24-hour news channel based in Israel).
Particularly noteworthy are the following:
(1) The Israeli tax authorities are taking active steps to prevent foreign residents from hiding funds there;
(2) Authorities suspect that foreign residents are laundering unreported income by purchasing luxury homes in Israel;
(3) The Israeli tax authorities plan to exchange information with foreign tax authorities on money held by foreign residents in Israel; and
(4) Israeli authorities are already actively cooperating with investigations conducted by foreign authorities, including participating in a series of joint police raids of homes owned by French nationals in Israel.
A recent article published on news website i24news.tv details comments made by Israeli tax officials
Authorities suspect immigrants of laundering money by buying houses
December 4, 2013
Israel plans to crack down on wealthy foreign residents who have turned the country into a tax evasion haven, according to Tax Authority Director Moshe Asher. His remarks follow a series of raids conducted last month at the homes of well-to-do immigrants, at the request of French police.
“Israel will not become a tax shelter for foreign residents,” Asher told a Jerusalem conference of the Institute of Certified Public Accountants on Tuesday, according to a report in the daily Haaretz. He added that his agency plans to exchange information with foreign tax authorities on money held by foreign residents in Israel - in return for information from overseas tax agencies on assets held by Israelis abroad.
Authorities suspect that Israel has turned into a tax shelter over the past decade as a result of pro-immigration laws that exempt immigrants from paying local taxes on their assets and enable them not to report assets for their first 10 years in the country.
Asher said that some of the steps the authority is taking to combat tax avoidance include plans restricting the size of cash transactions, hiring new inspectors, stepping up reporting requirements by money changers and defining violations of Israel’s Money Laundering Law as serious crimes.
Last month Investigators from the Tax Authority and the police's anticorruption and economic crimes unit entered luxury homes owned by French Jews suspected of tax evasion.
The raids came in response to a request by French police, sent through Interpol, based on suspicions that some French Jews had committed tax fraud and evasion in France involving massive sums. They are suspected of laundering the cash by buying luxury homes in Israel.
“The operation was undertaken in accordance with a request for aid received as part of the cooperation between the Israel Police and law enforcement authorities abroad," the Israel Police said in a statement. "It was not part of an investigation conducted by the Israel Police.”
Sources told the financial daily ''Globes'' that in the past few months French police officers have been in Israel to monitor wealthy immigrants from France, recorded conversations at cafes and exclusive restaurants in central Israel, bugged phone calls, and ultimately raided homes in luxury neighborhoods.
The French police also reportedly questioned some of the suspects. One of the officers involved in the raids told "Globes", "French-speaking investigators arrived at a house together with Israeli police officers and turned it upside down. They left total chaos behind them."
The Israeli authorities have long suspected that the rising real estate prices, for example in 2007, have been linked to Jews from abroad seeking tax havens.
In the third quarter of this year, prices of four-room homes in Tel Aviv reached an average NIS 2.66 million, 5% higher than in the previous three-month period and 6% higher than a year earlier - and beyond the reach of most home buyers. In Herzliya, prices rose 8% over the 12-month period to an average of NIS 1.93 million.
Crackdown on Israeli tax evaders
Israeli tax authorities have also vowed to track down citizens whose names appeared on a leaked list of account holders with deposits held in the English Channel island of Jersey, a well-known tax haven.
The names, addresses and account balances of 8,747 account holders were leaked to UK authorities in October. The list includes 602 Israeli citizens, the largest number of non-Britons.
The accounts were held at HSBC, Europe's biggest bank, with the funds deposited there allegedly to avoid taxes and launder money.
The leak came weeks after a tax amnesty expired September 27, under which Israelis had been allowed to belatedly report any income and assets held abroad and pay tax with minimum fines or other punishments.
Among the account holders on the list were 4,000 British citizens, 527 French, 333 Spaniards and 177 Americans, according to the London-based Telegraph.
Steven Sitcoff is a tax lawyer at Spiegel Sohmer who has experience with a variety of corporate and personal income tax matters, including voluntary disclosures to the federal and provincial tax authorities.