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August 27, 2016 / 23 Av, 5776

Posts Tagged ‘Finance Ministry’

A First: Kibbutzniks to Pay Personal Income Tax

Thursday, August 4th, 2016

Individual kibbutz members will be required to pay a 25% personal income tax as well as the Social Security Healthcare tax starting next January, according to a move by the Finance Ministry, Israel Hayom reported Thursday. The new taxes are expected to enrich the Finance coffers by close to $80 million annually, and the Social Security income by about $50 million.

Since the beginning of communal history, each kibbutz used to pay a corporate tax for all the members, and even after the change in taxation kibbutz members without outside income will not be required to file individually. But over the past few decades many kibbutz members have been working off the kibbutz grounds, contributing a portion of their income to the cooperative — and the Israeli tax authority would like to take a peek at those monies.

The Finance Ministry’s new rule must still go through the Knesset Finance Committee for approval, and the agricultural lobby is expected to put up a hard fight against the changes.

Amitai Porat, the Religious Kibbutz Movement Secretary General, and Nir Meir, the Kibbutz Movement Secretary General, on Wednesday wrote Prime Minister Netanyahu requesting that he halt Finance Minister Moshe Kahlon’s proposed changes in the tax code regarding kibbutzim. They told the PM that “Minister Kahlon is not interested in meeting us to find a solution that would make it possible to reexamine the tax code while maintaining and protecting the kibbutz character and the communal life in which we believe.”

David Israel

Airport Union’s Unique Strike Threat: Shabbat Observance

Thursday, August 4th, 2016

The Airports Authority Employees’ Union announced Thursday that they intend to observe Shabbat laws at Ben Gurion International Airport from dusk Friday until dark Saturday night. The strike was declared in protest of the Finance Ministry’s plan to take about half a million dollars in royalties from the airport authority. The union declared that the airports authority is not the cash cow of the state of Israel, and if the authority has been sitting on money the workers had been unaware of, it should use it to absorb the thousands of contract employees who are currently working without benefits.

A senior union member told Walla Thursday that the workers were enraged by the Finance Ministry’s decision to pull the funds, because “it’s clear to us that withdrawing the money will result in budget deficits at the authority, leading to mass layoffs.” He added that it looks like “the Finance Ministry wants to pay the costs of the government’s coalition agreements out of the Airport Authority’s money.”

According to the union, the Shabbat protocol will permit landings of already scheduled flights from abroad, but no takeoffs. But should the Finance Ministry not change its plan, further disruptions will follow.

This unusual, albeit partial observance of Shabbat laws comes at one of the busiest seasons at Ben Gurion International, with tens of thousands of Israelis leaving on their vacations every day. Last August saw the breaking of all time records, with more than two million passengers on international flights going through the airport.

JNi.Media

Bill Approved to Increase Competition in Israeli Financial Sector

Monday, August 1st, 2016

By Michael Zeff/TPS

Jerusalem (TPS) – The Israeli government unanimously approved legislation to increase competition in the Israeli financial sector on Sunday.

According to a Finance Ministry spokesperson, the legislation aims to shatter the current banking sector oligopoly by allowing new players to enter the financial and banking sector thus increasing market competition.

“The problem with Israeli banks is that they all suffer from a lack of efficiency in costs, which is necessarily rolled on to the consumers of their financial services,” Professor Omer Moav, an economics expert at the University of Warwick, told Tazpit Press Service (TPS). “Competition can help that. Allowing foreign banks to offer services, even through the Internet for example, will decrease costs and increase efficiency.”

The bill was proposed by Finance Minister Moshe Kahlon and is an implementation of recommendations made by the Committee on Increasing Competitiveness in the Economy. The committee was formed by Minister Kahlon and the Central Bank of Israel (CBI) in order to find legal ways to increase competitiveness and efficacy in the otherwise concentrated and cartelized Israeli banking system.

“The changes mandated by this law, mainly the recommendation to separate the banks from the credit companies, will create an advanced banking system and more competitiveness in the retail and small business fields in the upcoming years,” said CBI Governor Karnit Flug.

The main clauses of the bill include a separation of the major Israeli banks from Israeli credit companies. The three largest Israeli banks also currently own and operate the credit card companies.

The three banks, Hapoalim, Leumi, and Discount, together control about 75% of credit in Israel. The new law will force Hapoalim and Leumi at the least to sell their existing credit card companies.

In addition the new law will provide certain protections and incentives for potential new actors to enter the Israeli market, such as more flexible regulations to help them compete with the major banks.

“The bill also includes a pathway to the establishment of entirely new Israeli banks, better oversight on existing banks and on their competitiveness, the creation of new and improved databases for credit card companies, and the advancement of technology and innovation in local banks,” Governor Flug elaborated.

However, the measures proposed by the bill have been previously criticized by the International Monetary Fund (IMF) of which Israel is a member.

According to the IMF, the government committee that provided recommendations for the bill used old data in its analysis thus rendering the basis of the reform faulty and potentially harming the stability of the entire system.

While Flug and the CBI supported the bill and helped shape it to a large extent, Flug cautioned the government to implement the law responsibly. “An increase in the number of banks and financial brokers that are not banks means a higher risk of collapse,” she contended.

TPS / Tazpit News Agency

Knesset Committee Approves Submission to US IRS Tax Compliance Act

Tuesday, July 12th, 2016

After weeks of debates, on Monday the Knesset Finance Committee approved a bill to apply the Foreign Account Tax Compliance Act (FATCA), which the US has already signed with 113 countries. The 2010 federal law enforces the requirement for US citizens living abroad to file yearly reports on their non-US financial accounts to the Financial Crimes Enforcement Network (FINCEN). The law also requires all foreign financial institutions (FFIs) to search their records and to report the assets of US citizens living abroad to the US Department of the Treasury.

Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) was able, after lengthy negotiations with the Israeli Finance Ministry, to increase the protection of Israeli citizens whose information will be handed over to the US, and reduce in half (from about $27 thousand to about $13 thousand) the sanctions against financial institutions that fail to comply with new law for technical reasons. Gafni also managed to change the definition of charity organizations in the Haredi community (Gmachim), changing their definition from “financial institutions” to “organizations that benefit the public,” thus removing them from the FATCA zone.

The committee also succeeded in repelling the Israeli tax authority, which wanted initially to be able to use information gathered by Israeli banks for FATCA to their own local tax collection ends. As Gafni put it, “This is a bad law, and to come now and use it for other purposes that have nothing to do with its essence would be unthinkable.”

The issue of forcing foreign financial institutions and foreign governments to collect data on US citizens at their own expense and transmit it to the IRS has been attacked outside Israel as well. Former Canadian Finance Minister Jim Flaherty objected to the law’s “far-reaching and extraterritorial implications” which require Canadian banks to become extensions of the IRS and could jeopardize Canadians’ privacy rights.

There have also been reports of many foreign banks refusing to open accounts for Americans, making it harder for Americans to live and work abroad.

JNi.Media

Knesset Committee Slams Finance Minister on Fear of Fighting Monopolies

Tuesday, July 5th, 2016

“Five years have passed, and prices have not gone down, and in certain cases they have gone up,” members of the Knesset Finance Committee told government representatives during Monday’s meeting marking five years since the summer of 2011 popular social protest in Israel.

The committee members slammed Finance Minister Moshe Kahlon for “being afraid to fight the monopolies,” but members of Kahlon’s Kulanu party said in response, “We are advancing many reforms, and we can already see the results on the ground.”

Finance Committee Chairman MK Moshe Gafni (United Torah Judaism) said that “with all due respect to the Finance Ministry and talks of reform, in practice the prices have not gone down.”

MK Uri Maklev (United Torah Judaism) said, “Five years after the ‘cottage cheese’ protest, not only have the prices not gone down, in real terms they have increased, because the prices of commodities around the world have dropped 30-50%, and this is not being reflected in the Israeli market. Prices are 20% higher, on average, than in Europe. The prices of inputs have also decreased, as has the price of gas and energy, but this has not had any effect. What happened is that the monopolies and chain stores have gained huge profits at the consumers’ expense.”

MK Manuel Trajtenberg (Zionist Camp) explained that “the expense basket of a young family has three main components: housing, education and food. In housing the prices have only gone up; in education there has been some progress regarding ages 3-4, but not a week goes by that we are not asked to answer questions regarding family expenses related to education. An average family with three children spends some $1,300 a month on education, day care, afternoon child care, camps, and more. As far as food is concerned, some positive steps have been taken, but that nut has not been cracked and, ultimately, too much power has been left in the hands of a small number of companies.”

MK Yitzhak Vaknin (Shas) charged that the Trajtenberg Committee, which examined and proposed solutions to Israel’s socioeconomic problems, was established only to “ease tensions” and “take the wind out of the social protest’s sails.” In practice, he said, “nothing has been done.” Vaknin called to restore price controls, saying “in the absence of competition, this is the solution.”

MK Oren Hazan (Likud) said the problem is “greed.” The chain store owners and the major wholesalers “earn tens of millions on the public’s back,” he stated. “And meanwhile, here in the Knesset, people are strong at talking. The finance minister can make bold decisions and change the market without fearing his friends the tycoons. Here in this committee we have the power to advance a plan to dissolve the monopolies. We will enact a law to that effect.”

MK Roy Folkman of Kulanu said, “We have waged an all-out war on the monopolies. In Israel there is a very high concentration of market controls, and a finance minister who does not fear them has now arrived. We launched reforms in the importing of fresh meat and the prices have dropped. With fish as well, we created parallel importing. For years no one has dared to deal with the monopolies, which maintain a stronghold on Israeli politics, and we have started doing so. A change can already be seen in toiletries, food items, children’s toys and other items. The fight takes courage and ability. Increasing competition is the only way. Price control does not work; [corporations] would only raise the prices of other items. The business sector is more sophisticated than the regulator.”

MK Rachel Azaria, also from Kulanu, said “We are making great efforts, but every issue that reaches the Knesset gets stuck there. Every reform encounters objections, and it is nearly impossible to pass anything, including the fight against black market capital. I belong to the finance minister’s faction and it is my job to pass things, but nothing can be advanced; there are always dramas here; in some cases it’s the kibbutzim, in others kashrut – everybody has an interest. We have to be brave and deal with the basic problems: monopolies, quotas and interested bodies that prevent change. In the Arrangements Law we will introduce important reforms, and then we will see if all those who are yelling here will support them. We are the cause of the high prices. We have an opportunity to lower the cost of living, and I hope everyone here will support [the measures].”

JNi.Media

New Legislation Would Free Up $1.5 Billion in Credit for Israeli Housing Starts

Thursday, June 9th, 2016

Construction companies are no longer allowed to charge their customers fees for their own legal services, according to a key item in a new amendment to the Sales Law being promoted by the Ministry of Housing and Construction, Calcalist reported Thursday. Another significant change in the law would remove the requirement that contractors post a bank guarantee for the VAT portion of the cost of the apartment, and instead the state would set up a special fund to cover the buyers’ outlay. This would save contractors millions of dollars, releasing more than $1.5 billion in bank credit to the real estate market. The construction firm would still have to insure the rest of the buyer’s investment, in case said firm goes out of business.

The Housing Ministry, which began the move to amend the law nine months ago, is hoping the changes would pass by the end of the Knesset summer session in August. The move was spurred by the common understanding that the construction section of the current Sales Law is outdated, and has led real estate companies to develop their own ways of bypassing it, at the expense of their customers. The amendments were forged by an inter-office team that included Deputy Attorney General Erez Kamenetz, the Consumer Protection Authority, the Finance Ministry, and the Tax Authority.

“It is our responsibility to help the Israeli public get accessible housing, while legally protecting the buyers and maintaining fairness in all processes,” Minister of Housing Yoav Galant told Calcalist. One of the problems in the way housing business is done in Israel has to do with the buyer paying the contractor’s attorney for processing the new apartment at the Land Registry Office (the local word for the office is Tabu — no relation to taboos, the word is simply the Arabic mispronunciation of the Turkish word Tapu, or title-deed). A recent legislation limited the fees paid to said attorney to about $1,300, but even so, the clients may believe that by paying his fees the attorney is now working for them, which he certainly isn’t — he remains in the service of the contractor.

The Housing Ministry believes that registering the apartment and providing a legal deed is part of the overall product the contractor is expected to provide, and so they now want to go one step further and eliminate altogether the requirement for buyers to pay for this service.

There are other amendments which are not as crucial economically, but certainly add transparency to the process of buying an apartment in Israel. Companies would have to inform buyers of every change they intend to make in the original construction plan, for instance, if they want to add apartments. They also must inform buyers of changes in nearby lots, so that, if, for instance, their magical view of the Mediterranean would now be blocked by a 48-story tower, buyers would have the opportunity to get out of the deal and look elsewhere.

Contractors may no longer be permitted to sell apartments on land that is yet to be re-zoned for construction. If a plan for a new housing construction exists but the permit for building has yet to be issued, firms may sell units to buyers, but only with the proviso that the project is not yet legally authorized, providing the date for the expected authorization, and that buyers can get their money back in its entirety should the permit not be issued.

Also, any significant change in a purchased apartment’s layout, including in common areas such as storage spaces and lobbies, would be considered legally as failure to fulfill the contractor’s commitment and buyers may recoup their investment.

JNi.Media

Haredi Party Spearheading Effort to Protect Israeli Religious Charities from US Tax Authorities

Tuesday, June 7th, 2016

The heads of charity organizations in the ultra-Orthodox society, commonly known as Gemachim, received at least a temporary measure of relief from the Knesset Finance Committee, chaired by MK Moshe Gafni (UTJ), ahead of a new amendment of the Income Tax Act that takes effect in September and compels Israeli financial institutions to report through the local tax authorities on the Israeli financial affairs of US citizens. The amendment is the result of the Foreign Account Tax Compliance (FATCA) agreement between Israel and the US, which was a prerequisite for continued cooperation between Israeli and American financial institutions.

It’s not much, but MK Gafni demanded that the Finance Ministry and the Bank of Israel order the banks to give the Gemachim time until the end of June to resolve their status as public institutions, which he hopes would allow them to exclude themselves from the FATCA rules. Gafni envisions a tweaking of the amendment to exclude groups with deposits of less than $50 thousand, or holdings worth less than $50 million.

According to Chairman Gafni, the new regulations could bring the collapse of the Gemachim. “The Israeli government signed an agreement with the US government without considering the disastrous consequences for one of the most important enterprises of the Jewish people that has existed for millennia — the charity and mutual aid societies,” Gafni said, explaining that the Gemachim are “the only means at the disposal of a person under financial duress to receive an interest-free loan to get back on his feet.”

MK Israel Eichler (UTJ), Chairman of the Public Petitions, summoned Dr. Ilan Steiner, Director of the Bank of Israel Currency Department, to his committee hearing, to warn him against another aspect of the US attack on these charity institutions. According to Eichler, banks are being forced under pressure from foreign governments to close the accounts of Gemachim accounts, “in the name of ‘fighting terrorism’ and stopping money laundering, the IRS and the American government have become supervisors of all bank accounts around the world including in Israel. Everyone has to go through their inspection, so the Gemachim have received a letter that they will not be able to keep their bank accounts anymore.”

MK Eichler told Dr. Steiner: “I hope that the Bank of Israel find a way to abide by the agreements with the US while not mixing up the Gemachim with the war on terror. The banks must not become a burden and a restriction on associations and charity organizations who want to help people and do not engage in terrorism. There are limits to the madness of the banking system. We must not allow the charity organizations and Gemachim to be paralyzed by American pressures.”

The issues of compliance regarding money laundering and the war on terror stem from the side benefits of an IRS act that was intended to make sure US citizens who make money abroad share some of it with Uncle Sam. According to the IRS, FATCA targets tax non-compliance by US taxpayers with foreign accounts, focusing on individuals’ reporting about foreign financial accounts and offshore assets, as well as by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest.

Using the US’ enormous economic clout, FATCA bullies the world’s financial institutions into reporting on their American clients to Uncle Sam. Under FATCA, to avoid being withheld upon, foreign financial institutions must register with the IRS and agree to report to the IRS about their US accounts, including accounts of foreign entities with a substantial US ownership. Foreign institutions that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA.

Talk about working for the Yankee dollar.

According to The Marker, Gemachim stand to suffer three different ways from the new law: instead of permitting a Gemach to transfer money into their accounts, they could now be questioned regarding the source of the funds and whether or not tax was paid on them in the US; each deposit could be subject to harassment by the bank, in order to verify that it is not part of a money laundering scheme; and the Gemach could be saddled with a new definition as a financial institution, and as such would be compelled to report on its fund sources to the IRS or face criminal sanctions.

JNi.Media

Printed from: http://www.jewishpress.com/news/breaking-news/haredi-party-spearheading-effort-to-protect-israeli-religious-charities-from-us-tax-authorities/2016/06/07/

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