- Israel loses billions due to inadequate crypto tax enforcement and mismanagement.
- State Comptroller highlights significant gaps in crypto tax reporting and collection systems.
Israel has reportedly lost billions of shekels in potential tax revenue from cryptocurrencies, according to a report published today by the State Comptroller and Ombudsman. The audit highlights severe lapses in the nation’s approach to taxing digital currencies, revealing an estimated annual revenue loss of NIS 2 to 3 billion from 2018 to 2022.
A key finding is that only 0.25% of an estimated 200,000 digital currency holders filed tax returns during this period. The Israel Tax Authority (ITA) introduced a special tax payment procedure on December 31, 2023, enabling direct payments to the ITA’s account at the Bank of Israel. However, this initiative recorded zero participation, exposing significant gaps in the system.
Moreover, the report stresses that Israel’s indecision to join the OECD’s Common Reporting Standard (CRS) for automatic exchange of financial information could risk the country’s international standing. The State Comptroller warns that this inaction may lead to Israel being avoided by the OECD, complicating tax enforcement and damaging the nation’s reputation.
Report Stresses Strong Reforms
The report suggests urgent reforms, urging the Bank of Israel to facilitate tax payments through commercial banks to simplify the process. It also calls for enhanced collaboration among the Bank of Israel, the ITA. And the Money Laundering and Terrorist Financing Prohibition Authority.
The State Comptroller underscores the need for the ITA to establish clearer tax regulations for cryptocurrency. Israel has fallen behind nations like the United States, the United Kingdom. And the European Union, which has progressed in crypto regulation.
Ultimately, clear regulations are seen as crucial for improving public trust, increasing tax compliance. And positioning Israel as a leader in the crypto economy, while realizing significant tax revenue potential. The report emphasizes that coordinated action is needed to harness the financial benefits of the growing digital asset market.
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