Tax Authority probes more US accounts
The Tax Authority on Tuesday said that it had in recent days obtained additional information about 30,000 accounts at US financial institutions belonging to Israeli residents in 2014. This information comes on top of information obtained in January about 35,000 such accounts in 2015.
The information is the result of measures for creating international transparency between countries for the purpose of reining in unreported capital and tax evasion. Global cooperation and transfers of information between countries were stepped up last year as part of the campaign against unreported capital.
Among other things, the Foreign Account Tax Compliance Act (FATCA) agreement went into effect, in which the Tax Authority began transferring information about the financial assets of Israeli citizens with an affiliation in the US.
In order to handle the enormous quantity of information, involving hundreds of thousands of accounts yearly, Tax Authority director Moshe Asher assembled a special task force composed of representatives from the international department, the intelligence and investigations division, the tax assessment division, the auditing division, and the automated processing service. After the information is sorted and converted, the records are given to the investigative and intelligence units and the assessment offices according to their characteristics.
Signed by Israel and the US, the FATCA agreement requires banks and financial concerns in all the signatory countries, including Israel, to transfer to the IRS information about accounts, financial assets, and income of US citizens in those countries. As part of this agreement, data about the accounts owned by US residents and citizens in 2014-2015 identified and reported by financial institutions in Israel was transferred to the IRS in November-December 2016. Starting in January, the Authority began to receive data about the accounts of Israeli residents at financial concerns in the US.
The records received from the US include a range of particulars pertaining to account owners residing in Israel. The Authority will assess and sort the information, and compare it to the reports made by those Israelis to the Authority. People who reported accounts to the Authority will be spotted in the sorting process, as well as those who reported an account in the framework of the voluntary disclosure campaign.
Being involved in a foreign company or holding an overseas bank account does not constitute a tax or any other kind of violation, but such involvement must be reported, and not all Israelis with overseas operations comply with this requirement. By law, an Israeli citizen is entitled to hold an overseas bank account, but the account and the income from it must be reported to the Tax Authority, including income from interest, dividends, and capital gains.
After the Authority cross-checks the information reported from Israel with the records transferred from the US about overseas accounts, the Authority is liable to institute proceedings against Israelis who did not report as required the money kept overseas.
The Tax Authority is likely to continue receiving information automatically from the IRS every year. This is part of a broad process of receiving financial information about Israeli residents, including information from many countries in the framework of the Common Reporting Standard (CRS) agreement initiated by the OECD that establishes automatic exchanges of information about the financial accounts of foreign residents.
As part of this process, Israel is slated to exchange information with various countries by September 2018 about balances in 2017. In addition, the Tax Authority has lists obtained from other sources, including a list of over 8,000 Israeli customers with accounts at HSBC Switzerland.