The Israeli government is attempting to track cryptocurrency holders exceeding worth $61,000.
Israel’s Ministry of Finance predicts that the new legislation, framed as a “war against black capital,” may generate an additional $9.2 million in state revenue through taxation.
Israel’s government is stepping up efforts to prevent tax fraud and plug loopholes for would-be money launderers as part of a “war against black capital.” Among the provisions described in a new draft bill published this week by the Ministry of Finance is a further statutory obligation intended to increase the inspection of cryptocurrency users.
The proposed Law would require cryptocurrency users who have purchased 200,000 Israeli shekels ($61,000) or more in cryptocurrencies to file a report with the Israeli tax authorities. This law will also be imposed on the ones whose crypto holding is currently worth $61,000.
This reporting requirement would apply to any Israeli citizen who possessed cryptocurrency worth this amount or more on one or more days during the tax year, either individually or on behalf of a kid under 18. According to the bill:
“Virtual currencies have become commonplace among the public, and they are practically traded as an asset on exchanges. Digital coins can be subdivided into small units, transferred relatively easily by electronic means, and are not subject to surveillance or inspection. In these circumstances, virtual currency is a convenient and effective means of concealing income, accumulating undeclared assets and money laundering.”
If passed, this law would generate an estimated 30 million shekels ($9.2 million) in additional revenue for the state in 2022. Meni Rosenfeld, chairman of the Israeli Bitcoin Association, submitted a letter to Israeli Tax Authority chief Eran Yaacov earlier this week, according to a report from the Israeli business newspaper, TheMarker.
He suggested that the general reporting requirement would result in creating a database of Bitcoin holders, which would be unparalleled for any other asset.
Rosenfeld further stated that crypto investors might qualify for a reporting duty one month due to the volatility of digital assets’ prices and then fall below the threshold shortly thereafter. He said that hurriedly amending the law without discussion or comprehension of the implications severely affects investors’ rights to a hearing and compromises the proposed legislation’s effectiveness.
Additionally, Israeli daily Globes noted Rosenfeld’s criticism that the measure will unfairly discriminate against Bitcoin holders and portray them as “possible criminals.” According to him, the proposed regulations go against broadening access to the digital economy, an industry that currently faces enormous regulatory obstacles.
According to tax attorney Itay Bracha, the law is “another aggressive step by the government toward becoming a ‘Big Brother.’ The result demonstrates unequivocally that the state does not trust citizens to properly declare and pay their taxes.” Bracha further emphasized that, despite their classificational equivalent, reporting responsibilities are not necessary for Israel for investors who trade stocks or other assets.
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