Overall Israel received a score of 58, putting it 38th among all of the places studied in the report.
Israel Score Breakdown
The report on Israel’s financial secrecy indicators reveals that the country has room for improvement in offering satisfactory financial transparency. Below is an analysis of each indicator, indicating whether Israel passed or failed and the reasons behind it:
1. Banking secrecy: Israel does not adequately curtail banking secrecy. This means that the jurisdiction does not have sufficient measures in place to prevent the secrecy and confidentiality of banking activities, making it difficult for authorities to access information on financial transactions.
2. Trust and Foundations Register: Israel does not put details of trusts on public record. This indicates that there is no public register available to provide information on trusts and foundations operating within the jurisdiction, potentially allowing for the concealment of assets and beneficiaries.
3. Recorded Company Ownership: Israel does not maintain company ownership details in official records. This suggests that the relevant authority does not obtain and keep updated information on the beneficial ownership of companies, making it challenging to trace the true owners and potential financial irregularities.
4. Public Company Ownership: Israel partly requires that ownership of companies is put on public record. While some information regarding company ownership is made publicly available, it is not readily accessible online, and there may be restrictions or higher costs associated with accessing this information.
5. Public Company Accounts: Israel does not require that company accounts be available on public record. This indicates that the jurisdiction does not enforce the disclosure of company accounts for public inspection, limiting transparency and hindering accountability.
6. Country-by-Country Reporting: Israel does not require country-by-country financial reporting by companies. This means that companies listed on the national stock exchange are not mandated to provide detailed financial information on a country-by-country basis, which could potentially facilitate tax avoidance and the concealment of profits.
7. Fit for Information Exchange: Israel does not require resident paying agents to report to the domestic tax authorities about payments to non-residents. This lack of reporting requirement makes it challenging for tax authorities to monitor and track payments made to non-residents, potentially enabling illicit financial activities.
8. Efficiency of Tax Administration: Israel uses appropriate tools for effectively analyzing tax-related information. This indicates that the tax administration utilizes taxpayer identifiers and has a large taxpayer unit, suggesting that they have the necessary infrastructure and capabilities to efficiently analyze tax-related information.
9. Avoids Promoting Tax Evasion: Israel avoids promoting tax evasion via a tax credit system. This suggests that the jurisdiction does not grant unilateral tax credits for foreign tax payments, which helps prevent individuals and businesses from using the tax system to evade their tax obligations.
10. Harmful Legal Vehicles: Israel partly allows harmful legal vehicles. While the report does not provide specific details, it suggests that Israel allows some legal structures, such as cell companies and trusts with flee clauses, which could potentially be used for illicit purposes.
11. Anti-Money Laundering: Israel partly complies with international anti-money laundering standards. This indicates that there are some areas where Israel falls short of the recommendations set by the Financial Action Task Force (FATF) regarding preventing money laundering.
12. Automatic Information Exchange: Israel does not participate fully in Automatic Information Exchange. This means that Israel may not fully cooperate with international initiatives, such as the European Savings Tax Directive, which aim to exchange financial information automatically between countries.
13. Bilateral Treaties: Israel has few tax information agreements complying with basic OECD requirements. This suggests that Israel has limited bilateral treaties that provide for broad information exchange on all tax matters, potentially hindering international cooperation in tax-related issues.
14. International Transparency Commitments: Israel has partly ratified relevant international treaties relating to financial transparency. This indicates that while Israel has taken steps to ratify some international treaties, it has not ratified all of the five most relevant ones, pointing to potential gaps in committing to global transparency standards.
15. International Judicial Cooperation: Israel partly cooperates with other states on money laundering and other criminal issues. This suggests that Israel collaborates with other countries to some extent in combating money laundering and other criminal activities, but there may be areas where further cooperation is needed.
Overall, the report highlights several areas where Israel has fallen short of acceptable international standards in terms of financial transparency, such as banking secrecy, company ownership records, and country-by-country reporting. However, it also acknowledges that Israel has made progress in areas like tax administration efficiency and avoiding the promotion of tax evasion.
About Taxation and Finance Transparency
Financial transparency refers to the clarity and openness with which financial institutions, including countries, reveal information related to their financial activities. It encompasses aspects such as public access to information about banking secrecy, company ownership, public company accounts, and other related financial dealings. The significance of financial transparency lies in its potential to curb illicit financial activities, including tax evasion, money laundering, and other corrupt practices. Without transparency, these opaque financial environments can inadvertently or intentionally support the concealment of funds, leading to lost revenues for governments and skewing economic fairness. The assessment of financial transparency is typically based on a set of Key Financial Secrecy Indicators. These indicators serve as benchmarks to evaluate how well a jurisdiction adheres to international transparency standards, shedding light on areas of strength and pointing out facets that need improvement.