Beware the taxman

Published in The Jerusalem Post on September 27, 1998

Zionism is dead. Aliyah is unimportant. Olim are useful, if at all, as a lucrative source of tax revenue. Pushovers for the hungry taxman. That’s the latest word from the Finance Ministry, which now intends to tax the global income of all Israelis, even that earned abroad by new immigrants before coming here.


Nice to know that we western immigrants are appreciated by the Zionist enterprise.


Now you tell me if the Treasury’s newest proposals — already into their first reading in Knesset — make sense.


Take, for example, your sweet, aging Jewish mother in downtown Chicago. She raised four fine kids on the JNF *pushka*, paid through the nose for Jewish/Zionist day school, told her children Golda Meir stories, sent them to *hachsahara* on kibbutz, and supported all four in their aliyah. Each month for all those years, she put a couple of dollars into municipal bonds, tax free, for her retirement.


With a dozen little grandchildren populating the Zionist entity, some serving in the army, and their parents productive, tax-paying citizens, Mother Dear decided ten years ago to herself settle down in Raanana or Jerusalem. To be with the family. To enjoy the fruits of her life-long Zionist endeavor. To watch her brood grow in the state she helped build and populate. A beautiful thing.


Such a mother is to be appreciated. She deserves her just rewards. Welcome to Israel, welcome home, Mom. Right?


Wrong, now says Mr. New-Sophisticated Israeli Taxman. Reward? Poppycock – let us fine her! Make Mother Dear pay Israeli taxes, something between 35 to 50 percent, on the retirement income from the municipal bonds she is squirreling away in the US, hiding from its rightful owners in the Israeli government.


From now on, Mother Dear will have to file a personal income tax return, report her annual gains, and contribute like any other citizen to the Israeli tax base.


Well, I think that’s wrong, stupid, simply anti-Zionist. Time for all us western olim to wake up and tell the taxman – No! Reconsider the legislation now, before it goes through.


Reform of Israel’s taxation system is needed, I admit, and on paper, the Treasury’s plan makes sense. Expand the tax base by eliminating exemptions, and lower marginal tax rates.


But the Treasury has about as much chance of successfully passing legislation to tax Israeli savings plans, residential rental income, pension plans, professional development funds (the *keren hishtalmut*) or capital gains from the stock market – as I do of being the first Jew on Jupiter. Every big lobby in the country will stand resolutely in Yaacov Neeman’s way.


So what’s left? Where is the Finance Ministry going to get the expanded revenue necessary in order to justify the promised reduction in tax rates? From people with money abroad, of course, especially now that Israelis are freely allowed to invest their money anywhere in the world. Ergo, the plan to levy taxation on global income, like the US and Britain.


Now, I can just see all those veteran Israelis who’ve been stashing away funds abroad for all these years, illegally, all-of-a-sudden running to declare their overseas income for Mr. Neeman! More likely that it’ll be the Zionist immigrant pensioner, who honestly files when told, owning-up to the taxman. Paying a fine, in essence, for having moved here.


Since these tax proposals have been so comprehensively refined by the top experts in the country over two years of study, it is unthinkable that the olim problematics weren’t considered, you figure. The tax reform legislation now before the parliament is so narrowly myopic and patently unfair to immigrants that, well, one has to assume the Treasury will catch-on and amend its proposals with exemptions that redress the potential damage. Or so I thought.


But quick calls to the Finance Ministry’s director-general, and to its chief tax reform planner, tell a different story. Prof. Benzion Zilberfarb, the director general — an honest man, upstanding public servant and a top-flight economist of international stature — wasn’t at all aware of the problem. (But he promised to check into it, and I’m sure he will).


Tsipi Galyam’s office (which planned the tax reform and calculates state revenue) tried to convince me that “fair’s fair”. Immigrants ought not be entitled to tax breaks on income abroad more so than any other Israeli, beyond credits for tax already levied by a foreign government — her deputy Avi Lavon told me. And he admitted that there were no discussions underway to legislate built-in exemptions for pensioner immigrants, or for young immigrant families with inheritance monies abroad.


“Exemptions for olim from the new foreign income tax is not something we’ve felt the need to consider”, Lavon says. Sure, because olim are a weak group, easy to hit on, and behind us stands no powerful Manufacturers Association or other lobby group.


But wouldn’t this be a good time to create one?

David M. Weinberg is a think tank director, columnist and lobbyist who is a sharp critic of Israel’s detractors and of post-Zionist trends in Israel. Read more »
A passionate speaker, David M. Weinberg lectures widely in Israel, the U.S. and Canada to Jewish and non-Jewish audiences. He speaks on international politics and Middle East strategic affairs, Israeli diplomacy and defense strategy, intelligence matters and more. Click here to book David Weinberg as a speaker

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