Tax offenses are considered serious violations under Israeli law due to their direct impact on the economy and public trust. These offenses include tax evasion, false reporting, the use of fictitious invoices, and non-payment of various taxes. Israeli law provides a unique mechanism to address certain cases: the conversion of criminal proceedings by paying money ransom. This mechanism offers a way to resolve criminal cases efficiently without a formal conviction, under defined conditions.
What is the Conversion of Criminal Proceedings by Paying Money Ransom?
The conversion of criminal proceedings by paying money ransom allows a taxpayer suspected of a tax offense to pay a financial sum to the Tax Authority in exchange for the cessation of criminal proceedings. This option allows taxpayers to avoid criminal conviction and its associated consequences. However, it is important to emphasize that paying the ransom does not exempt the taxpayer from paying the full tax liability or rectifying the tax violations that led to the case.
Legal Framework for Conversion of Criminal Proceedings
The authority to convert criminal proceedings by paying money ransom is established in several Israeli tax statutes, which outline the legal basis and criteria for such arrangements:
- Income Tax Ordinance [New Version], 1961: Section 221 empowers the Tax Authority to convert criminal proceedings for offenses such as failure to report income, submitting false declarations, and aiding in tax evasion.
- Value Added Tax Law, 1975: Section 121 allows for the conversion of proceedings for offenses related to non-payment of VAT, fraudulent reporting, and similar violations.
- Real Estate Taxation Law (Appreciation, Sale, and Purchase), 1963: Section 101 provides for the conversion of criminal proceedings for offenses related to capital gains tax and purchase tax.
- Customs Ordinance [New Version]: Section 231 establishes the authority to convert proceedings in cases of smuggling, submission of fraudulent customs documents, and other customs-related offenses.
- Purchase Tax Law (Goods and Services), 1952: Section 25 permits the conversion of proceedings for violations involving evasion of purchase tax.
- Fuel Tax Law, 1958: Section 29 governs the conversion of proceedings in cases of fuel excise tax evasion.
Procedure for Requesting the Conversion of Criminal Proceedings to Money Ransom
The procedure for requesting a money ransom payment involves several key stages:
- Submission of the Request: The taxpayer or their legal representative submits a formal application to the investigative division of the Tax Authority. The request must include justifications for leniency, relevant documents, and evidence of rectifying the violations, such as payment of outstanding taxes.
- Examination by the Investigative Division: The division reviews the application and forwards its recommendation to the Ransom Committee.
- Deliberation by the Ransom Committee: The committee evaluates the request according to statutory and administrative criteria, including the taxpayer’s criminal history, cooperation with authorities, and the broader public interest.
- Determination of the Ransom Amount: If the request is approved, the committee determines the ransom amount based on the severity and scope of the offense and other relevant factors.
- Payment and Case Closure: Once the taxpayer pays the ransom amount and fulfills any other conditions, the criminal case is officially closed.
Key Considerations for the Ransom Committee
The Ransom Committee considers various factors when deciding whether to approve a request for conversion:
- Severity of the Offense: Offenses involving significant tax evasion or repeated violations are less likely to qualify for conversion.
- Duration of the Violation: Prolonged offenses are viewed more severely.
- Criminal History: A clean record improves the likelihood of approval.
- Rectification of Violations: Demonstrating full payment of tax liabilities and correcting errors is a critical prerequisite.
- Personal and Family Circumstances: Health issues, psychological stress, or dependency of family members on the taxpayer may influence the committee’s decision.
- Public Interest: The committee balances the need for deterrence with the efficiency of resolving cases and conserving public resources.
Ransom Amount Determination
The ransom amount is determined based on the nature and scope of the offense:
- For Income Tax Offenses: The ransom amount is calculated as a percentage of the undeclared revenue.
- For VAT Offenses: The ransom amount is based on the unpaid VAT.
Typically, the amount ranges between 15% and 30% of the unpaid taxes but may be higher for severe violations.
Advantages and Disadvantages of Paying Ransom Money
Advantages:
- Avoiding Criminal Conviction: Taxpayers benefit from avoiding a criminal record, which can have lasting repercussions on employment and reputation.
- Efficient Resolution: The process is quicker and less resource-intensive than full criminal proceedings.
- Certainty: Paying the ransom provides clarity and closure, avoiding the uncertainty of lengthy legal proceedings.
Disadvantages:
- Financial Burden: The ransom payment is an additional expense beyond the tax liability.
- Public Disclosure: Decisions of the Ransom Committee, including taxpayer names and ransom amounts, are publicly disclosed.
- Record of the Offense: While the criminal case is resolved, the violation remains documented within the Tax Authority’s records.
Publication of Ransom Committee Decisions
The Tax Authority publishes the committee’s decisions twice a year. The publication includes details such as the taxpayer’s name, the ransom amount, and the nature of the offense. This transparency aims to deter future violations and uphold public trust.
Conclusion
The conversion of criminal proceedings by paying ransom money is an effective tool for resolving tax offenses in a manner that balances the interests of the taxpayer and the state. However, the process involves navigating complex legal and administrative frameworks, necessitating professional legal guidance.
Yaniv Ish-Shalom & Co., Law Office, specializes in representing taxpayers in ransom money proceedings before the Tax Authority. Our expertise ensures that clients receive tailored advice and achieve the best possible outcomes. Contact us for professional legal support and representation.
