Almost every business owner or entrepreneur in Israel is forced, at one point or another, to deal with an issue related to the Tax Authority.
It can be an innocent-looking letter requesting clarification regarding a particular invoice, a request for documents to open an audit, and sometimes even a summons to a hearing or the initiation of criminal proceedings. In each of these cases, dealing with the authority requires in-depth understanding, sensitivity, and precise strategy. And this is exactly where legal advice turns from an alternative to a “luxury” – into a necessity.
Why do you even need a lawyer, when you have a tax advisor or CPA?
A tax advisor or accountant deals with numbers, calculations, and reports. A tax lawyer , on the other hand, deals with the interpretation of the law, individual rights, balancing with the authorities, and the limits of authority. When it comes to dealing with a body like the Tax Authority – a body that has both civil and criminal enforcement powers – it is not just an accounting matter, but a distinct legal matter.
The big problem begins when businesses rush to “close the corner” on their own. They send a letter without understanding the legal significance of what is written in it, submit documents as requested by the Tax Authority without providing a satisfactory explanation, or worse – talk about things without knowledge of the subject and sometimes verbally admit things that should not have been said. Any such mistake may change the direction of the entire process, and turn a routine inspection into a real suspicion.
The three circles of action: Where exactly does the lawyer come into the picture?
- The prevention stage – before there is a problem at all
Good legal advice begins before the tax authorities come knocking on the door. A periodic legal review of financial conduct, an understanding of the business structure, an analysis of agreements and risky behaviors – all of these enable the client to identify weaknesses in advance and prepare accordingly. In many cases, a small change in the wording of a document or the way a payment is recorded is enough to prevent unnecessary investigation. - Response phase – from the moment of receiving the request from the Tax Authority
The moment a demand, letter, or summons is sent – the real sensitivity begins. Every word is scrutinized. Professional legal advice will examine the very legality of the demand, the possible consequences of careless cooperation, and formulate a balanced response, based on precedents, the language of the law, and practical knowledge of how things really work behind the scenes. - The Defense Phase – When a Substantial Dispute Develops
Here, the lawyer is no longer just an advisor but a defender. Whether it is a hearing before an appeals committee, managing an administrative procedure, or representing the business in court – legal experience becomes the main tool of the represented business. Even in cases of a hearing before an indictment or suspicion of a criminal offense, the lawyer knows how to analyze the evidence, prepare an effective line of defense, and negotiate with the authority in order to minimize the damage.
And what about the psychological interface with the authority?
It is worth understanding: the Tax Authority is not just a technical system. Behind every letter are people. Some have vast experience, some have a strong desire to “prove activity”, others simply have a burden that leads to shortcuts. The lawyer knows not only how to read the law, but also how to read the professional dynamics of the case: who is the official handling it and what is his role, is there a public interest in the case, and where it is possible to legitimately influence the position of the authority.
Questions that must be asked – and most business owners don’t ask
- Am I allowed to not answer a certain question?
- What is the difference between a civil hearing and a criminal hearing – and how do you know where it’s going?
- Is it possible to negotiate with the PA without appearing to be admitting something?
- When is it worth “going head to head”, and when is it better to compromise?
- How do you contact the Tax Authority without causing them to reopen all of your business files?
At the end of every line – there is a strategic consideration
The phrase “Everything is fine, I’ll handle it myself” is perhaps the most common lie in the business world. In most cases, dealing with the tax authority requires professional skill, but no less than that – an informed approach, understanding the power structure and the ability to think a few steps ahead.
If you don’t ask the right questions, someone else may very well ask them for you. But when they do, you’ll be standing in front of them in an interrogation room. And at that point, you can’t take back the words that were said.
