Confusion Over Implementation Of Tax Reforms Reigns In Israel

by Robert Lee, Tax-News.com, London

15 August 2002

Israel's banking community has fallen out with the Income Tax Authority over the implementation of newly approved tax reform plans, according to reports.

Although the recently ratified tax changes provide for the phased introduction of a 1% turnover tax on securities transactions, and a15% capital gains tax on effective gains from 2004, exemptions are to be granted to low income earners and pensioners.

However, banks in Israel are concerned that they do not have the means to determine which of their clients are exempt and which are not, and in any case are not particularly enthusiastic about becoming tax collectors for the government.

Speaking to the Ha'aretz news service this week, Executive Director of the Association of Banks in Israel, Freddy Wieder revealed that:

'We have explained to Income Tax that banks do not manage taxpayers' finances, but the bank accounts of our clients. We do not know how to manage an exemption procedure, and we feel that the Income Tax Division must handle the matter.'

One possible solution which has been suggested could be the automatic imposition of the tax on savings and investments by banks, with any exempt clients able to claim the levy back from the tax authority at a later date. However, Mr Wieder told Ha'aretz that no final agreement on the issue has been reached as yet.

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