Israel new draft bill seeks reporting for digital currency holdings above $61K
Israel investors who hold more than 200,000 Israeli shekels ($61,000) worth of digital currencies may have to report to the tax agency if a new proposed bill becomes law. The bill is seeking to increase the amount of tax the Israeli government collects from the industry, but several leaders in the space are already up in arms against it.
The bill was proposed by the Ministry of Finance, and is part of its battle against black capital. It seeks to stamp out money laundering, terrorist financing and tax evasion in the Middle Eastern country. According to the Ministry, digital currencies have provided a new avenue for these illegal practices.
“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,” part of the bill stated.
Under the new bill, investors who purchased 200,000 shekels or more directly or through someone older than 18 will have to report the holdings with the Israeli Tax Authority (ITA) if they held the digital assets for at least one day.
The Ministry estimates that if the draft bill is approved, it would bring in an additional 30 million shekels ($9.2 million) in tax.
Israel’s proposed law is similar to a move by South Korea where the government has been turning to the digital currency industry for additional taxes as it grapples with an ageing population. However, as CoinGeek reported, South Korea has focused on the tax evaders.
The Israeli digital currency community has been quick to protest the new draft bill. According to one local report, the chair of the Israeli Blockchain Association Meni Rosenfeld wrote a letter to the tax agency this week. In it, he argued that the law will create a central database for digital currency holders that would make them prone to attacks.
Furthermore, it would bring confusion to the holders, especially with the volatile nature of most digital currencies, according to the organization. Investors might find themselves due to report their holdings one month, but after the prices drop, they may not have to report it the next. Those that fail to stay on top of market movements might miss out on some of their assets hitting the threshold and be labeled as tax evaders.
In addition, the law is victimizing digital currency holders as “potential criminals,” Rosenfeld added.
Nir Hirshman, yet another top-ranking official at the IBA, also voiced his concerns regarding the new law.
“This is a bad proposal that will harm bitcoin investors and won’t add even one dollar to tax collection in Israel. We believe that the demand to report crypto assets holdings in fiat terms will accidently turn normative law abiding citizens to tax offenders, just because they missed a spike in one of their assets holdings,” he remarked.
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