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The State of Israel owes citizens NIS 3.6 billion

The State Comptroller states: The state owes citizens billions, as a result of over-taxing.

Despite this, the tax authority, which knows how to collect so efficiently, does not initiate any move of returning money to citizens who are entitled to it.

The report also shows that two thirds of women in Israel do not reach the tax threshold

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• Internal Revenue Service

• Income Tax

• State Comptroller

Sonia Gorodisky

Monday, 18 October 2021, 08:29 Updated: Tuesday, 19 October 2021, 15:57

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"The state has 3.6 billion - tax money collected from the citizens - this is private money and the state is obliged downtime. The Tax Authority is not acting proactively granting tax rebates to eligible borrowers," wrote State Comptroller and Netanyahu Engelman report discusses utilizing the tax benefits of the Tax Authority.

Saying this disturbing Engelman refers to the public as employees who are not required to file an annual income tax return, and most of them are probably not even aware of the benefits to which they are entitled. Like, for example, people who worked in two or more jobs and as a result paid maximum tax because they did not make a tax adjustment or employees who worked part of the tax year and did not file a tax return report that was overpaid.

The cumulative amount of the excess tax paid over the years by employees who worked in two jobs in the same tax year is estimated at several hundred million shekels. Every year, hundreds of thousands of families pay more taxes in the amount of about a billion shekels.

The follow-up findings further revealed that hundreds of thousands of overpaid families do not file tax return reports at all and therefore do not exercise their right.

As of February 2021, according to the Tax Authority's calculations for the 2013-2019 tax years, it owes about 2 million cases (individuals who are not required to submit an annual income tax report) a total amount estimated at about NIS 3.6 billion.

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Eran Yaakov, Chairman of the Tax Authority. Will he work to implement the auditor's recommendations? (Photo: Official website, -)

There is also positive criticism: assistance to Holocaust survivors and parents of disabled children

However, beyond the pilot carried out by the Tax Authority in 2015, in which about 1,700 letters were sent to alleged beneficiaries who paid more tax, the Authority did not act every year to refund the tax amounts it collected in excess. On behalf of the Comptroller, he notes that the Tax Authority acted to promote the exercise of the rights of Holocaust survivors and parents of a disabled child.

"Did not act on its own initiative to return sums to citizens"

Already in the auditor's previous report on the subject from 2015 it emerged that although the Authority has information on the income of the taxpayer public, it does not have information from it on how it realizes the tax benefits to which it is entitled. Reviewed the barriers facing the public in exercising its rights. "The defect has been rectified to a small extent ... The Tax Authority has not acted to obtain the full information that will allow it to exhaust the rights of all taxpayers, including taxpayers who are not required to file an income tax return," the comptroller writes.

Furthermore, the audit revealed that even when the Authority had information regarding financial harm to citizens who did not exercise their right, it did not act on its own initiative to return these amounts, nor did it inform citizens that according to its data they are entitled to a refund.

Tax Authority Ministries: Did not act to return money to citizens even when it had information on their eligibility for a refund (Photo: Official Website, Eyal Yitzhar, Globes)

Hundreds of millions of shekels are waiting for hundreds of thousands of citizens

The audit shows that about 380,000 individuals or families who are not required to submit an annual income tax return lost a total of about NIS 670 million for the 2014 tax year because they did not submit a tax return report.

Based on 2014 data, it can be assumed that public losses (individuals or families who are not required to file an annual income tax return) amount to billions of shekels over the years. It also shows that as of 2021, 435,000 families have not yet submitted a report to the income tax for the tax year 2016. The

tax refund to which these families are entitled is estimated at NIS 803 million. According to the law, if they do not submit a tax refund report for this year by the end of the 2022 tax year, the families will lose this amount.

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The previous report found that tax benefits, such as the distribution of the goodwill tax and its distribution between the two spouses in the family unit are not exhaustive. Only 11% of people aged 60 and over and 4% under the age of 60 sought to spread the capital gain, they did not offset the capital gain against other capital losses and few of them divided the capital gain between the two spouses involved in the real estate transaction. The authority, for its part, has not provided the citizens with a simulator that will help them exercise their rights.

Between 2016 and 2019, the potential for improvement that could be divided between the couple in a real estate transaction in the amount of NIS 20 billion is estimated, also due to the fact that 67% of women (spouses) do not reach the taxable income threshold, or do not work - and have points left. Unutilized credits that can be offset against praise.

The previous report revealed that the method of calculating benefits in respect of pension savings deposits is complex, employees who do not understand the nature of the benefit offered to them are not expected to utilize it and the Authority has not developed computerized tools for extracting benefits within the family unit. The follow-up findings show that the deficiencies were not corrected, including that when submitting a tax return report, the authority did not provide the public with tools to assist it in recording family cell deposits to pension funds in a tax return report, in a way that would benefit the family cell.

In addition, the previous report revealed that sometimes the Tax Authority does not transfer to individuals (citizens who are not required to submit a report) credit balances accrued by it. If due to lack of updating bank account details, and if due to the need to act to locate those eligible. Follow-up findings suggest that the defect has been slightly corrected. However, the Tax Authority informed the State Comptroller's Office that in 2020 it refreshed the directive regarding the obligation to enter into the Tax Authority's computers the bank account details specified by the submitter of the tax refund report.

67% of women in Israel earn less than the amount from which they start paying tax (Photo: ShutterStock)

The income of about 67% of women is lower than the tax threshold

The report also shows that in 2018 and 2019 the income of most employees in Israel (57%) does not reach the tax threshold at all (they do not pay taxes due to their low income and personal data, while the percentage of self-employed whose income is lower than the taxable income threshold was about 40%. It was also found that the income of about 67% of women is lower than the tax threshold, while the income of 44% of men is lower than the tax threshold.

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