A tax investigation is essentially an economic investigation and is conducted by the investigation departments of the Israel Tax Authority, in the various districts; there are tax investigations that involve other offenses in addition to the tax offenses, and in which case the investigation will be conducted in cooperation with other investigative bodies, such as the Israel Police, and it will be called SIT (Special Investigation Team).
A tax investigation may be opened against a private individual, an independent dealer, a company and/or corporation, based on the suspicion of committing tax offenses; the most common offenses are concealing income (working under the table), inflating expenses by the use of fictitious tax invoices, filing false reports, smuggling goods, etc. Furthermore, a tax investigation can also be opened because of a suspicion of committing a technical offense, the most common of which is the failure to submit reports, administering account books not in accordance with the provisions, or the failure to transfer deducted payments, etc.
How is a tax investigation opened?
As a rule, an investigation will begin covertly; the Tax Authority operates an intelligence team that incudes intelligence officers whose job it is to gather information on various subjects; an investigation can be opened by obtaining information from an intelligence source operated by the intelligence officer, or on the basis of suspicion that arises in the Tax Authority’s sophisticated data analysis systems. On receipt of the information, an undercover investigation is opened, which deals mainly with establishing suspicions and gathering evidence prior to the open investigation, at which point the suspect / interrogee is unaware that an undercover investigation is underway against him. The material and the evidence are gathered by the intelligence system, covertly, with the aid of a range of methods and means, most of which are classified.
After gathering the evidence and formulating the suspicions, the investigation comes out into the open. In this case, the Tax Authority investigators surprise the suspect / interrogee, at his home, in the early hours of the morning, for the purpose of conducting a search of the home, during which, evidence of any kind will be seized (documents, computers, telephones, digital files, etc.). It is highly likely that on the same day, the suspect’s business, or his bookkeeper, and/or accountant will be searched, in order to seize evidence or even to investigate or question them. At the end of the search, the suspect will be detained and taken to the Tax Authority’s investigation facility, where he will be investigated for hours, and the evidence gathered will be presented to him and he will be required to respond.
From my wealth of experience, I can say that the moment when the suspect / interrogee is woken in the early hours of the morning and discovers that an undercover, and now open, investigation is being conducted against him is a very difficult moment for him and for his family, taking them by surprise in a most unpleasant manner.
As a rule, at the end of the investigation, at the investigation facility, the suspect will be brought before a judge for the extension of his custody for the purpose of investigating him, on the grounds that there are many investigative actions that the Tax Authority investigators must perform, actions which can only be performed when the suspect is in custody and unable to disrupt the investigation by coordinating versions or concealing investigation material that the investigators have not yet reached, and also for the purpose of performing interrogation tricks such as placing a “stimulant” in the suspect’s cell.
It is very important to be represented from the very first moment when a person / dealer / corporation understands that a tax investigation is being conducted against him / them. The Tax Authority investigators are highly professional and thorough, after undergoing extensive training, and any attempt to deal with them alone might cause irreparable damage to the suspect / interrogee, and thus harming his chances of completing the process with a significant reduction of the damages.
A tax investigation is a very serious business!!! The suspect is confused after being surprised in the early hours of the morning and being under a lot of stress. The best way to act, as soon as he realizes that he is under investigation is not to say a singe word until the arrival of the lawyer representing him.
Our firm has a wealth of experience in the field of tax investigations, at all stages of the investigation and the resultant legal proceedings.
