Prime Minister Benjamin Netanyahu has instructed the Minister of Finance, Bank of Israel Governor and the heads of the Israel Tax Authority and the Headquarters to Combat Crime in Arab Society to convene a discussion on the cancelation of the NIS 200 bill. Such a move would help the fight against black capital and according to its proponents add over NIS 20 billion to the state coffers. This development comes only two weeks after “Globes” exclusively reported that abolishing the NIS 200 bills was being considered following the promise by Finance Minister Bezalel Smotrich to fight black capital.
According to sources familiar with the matter, there is extensive support from senior government officials, including head of the Tax Authority, Adv. Shay Aharonovich, for cancelation of the bill. The source said, “Their weight and push in the matter is probably is what is resulting in such a rapid advancement of the plan. The Authority has been pushing for years towards reducing use of cash. The head of the Israel Money Laundering and Terror Finance Prohibiting Authority Adv. Ilit Ostrovich-Levi, is also supportive, and the senior officials at the Ministry of Finance have also voice support on the matter.”
Under the proposal, three main steps are proposed for the fight against black capital. The first and most controversial step is the cancellation of the NIS 200 bills, which according to the Bank of Israel constitute nearly 80% of the value of notes held by the public. The Bank of Israel would announce that within a short time, these bills would be canceled and no longer be able to be used as legal tender. People holding them would have to go to banks and exchange them for other bills, or deposit them in their bank account. Supporters of the plan say, “The move would allow for a dramatic reduction of cash in circulation and would force tax evaders to report them and pay into state coffers in order to replace the notes or deposit them – or lose them.”
The next step is a voluntary disclosure process, which would allow those who hold large amounts of cash to deposit them immediately, with “immunity from criminal charges regarding non-reporting of income, and payment of reduced tax without penalties.”
Adam Reuter, Hisunim Finance chairman, who signed the policy proposal, said, “The building decorator who has evaded taxes until now will be forced to stop hoarding cash, and will have both a stick and a carrot to start paying taxes legally.” In the long term, the plan aims to reach a completely cashless society. According to plan, all the moves would be implemented at the same time, otherwise “black capital will be shiftedfrom place A to place B,” according to Nurit Zeevi, an engineer and entrepreneur and another of the signatories of the proposal.
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One of the criticisms of the proposal- infringing privacy
However, there is criticism of the proposal. Firstly, the assumptions in the proposal about the tax amounts that would be collected are overoptimistic, since some of the capital can be replaced by switching to other notes, valuables or decentralized digital currencies like Bitcoin. But according to the proponents, “The value of the NIS 100 bills in circulation is only a fifth of that of the NIS 200 bills. In addition, if you are a criminal organization, you have to start moving bundles of NIS 100 bills and this starts to create more of an intelligence fingerprint. And the plan requires the Bank of Israel not to increase the amount of NIS 100 bills in circulation, which would lead to them being less available, and people would choose to use digital means more.” On Bitcoin, the plan’s supporters say: “Let’s see criminal organizations specialize in Bitcoin and their members pay in Bitcoin for the kindergarten and in the supermarket.”
Another criticism of the dramatic cut in the use of cash is the infringement of privacy, which today allows for cash, even in legitimate cases. “Yes, freedom is important and it also includes the right to privacy,” say the plan’s proponents, “but in a digital world where all transfers take place primarily through banks, there are few normative transactions in cash. Privacy for the most part died already decades ago, and we gave it all to corporations.” Although they concede that there is some damage to what privacy is left. But they add, “When you weigh the cost against the great benefit in the fight against black capital and criminal organizations, it’s worth it.”
A source close to Minister of Finance Bezalel Smotrich said, “I don’t think there is anything to say on the matter at the moment.”
Published by Globes, Israel business news – en.globes.co.il – on September 20, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.
