18.03.2012

If you want praise and your job is taxing other people, you may have to make do with self-praise.On March 14 the Israeli Tax Authority (ITA) announced on its website that it has just received an award for excellence in efficiency and bureaucracy reduction from the Israel‘s Civil Service Commission.

In addition, the Customs Authority recently received a national prize for quality and excellence. Doron Arbeli, Acting Director of the ITA, said that these prizes show the constant striving for excellence and efficiency at the ITA.

The section of the ITA which received the awards is called the Client Service Division. Taxpayers are considered to be ‘‘clients‘‘. The Division is headed by Yael Shavit, acts to rationalize and improve work practices, by, among other things, locating bottle-necks and dealing with them. It also improves turnaround times using online techniques.

Consequently, achievements cited in the above award to the ITA included: ‘‘Reducing the burden for applicants to the ITA‘s departments; improving the service and preventing pressure on applicants who hitherto had to wait in long queues; and cost efficiencies. There are now telephone help lines overseen by the ITA management which facilitate: measurement and achievement of clear achievable goals, giving prompt and good answers to clients, reduction of bureaucratic processes, and simpler service‘‘

The award to the Customs Authority was for the work of its Investigations Division. Since 2005, it has a applied the concept of ‘‘power multiplication‘‘ to deal with serious offenses.

This apparently included improvements in work procedures and cooperation with other organizations, (i.e. not re-inventing the wheel).

Comments:

As a tax practitioner, a few comments come to mind.

The improved efficiency of the Tax Authority is commendable. But it is to be expected, as it is largely thanks to technological progress. Only a cave man dweller might find it hard to improve.

There has been an improvement in service on the technological side. And it has been matched by a friendlier attitude from many officials. I recently had a good chat with a Tel-Aviv tax collector about the merits of the Pink Floyd rock group and got what I needed for my client.

Nevertheless, filing CPA registrations and annual tax returns is a duplicative and wasteful process. First you enter details online, then you print it all out on paper, get it signed, and file the paper version again with the ITA. Even if the ITAS sometimes needs supporting documents (for example confirmations of tax withheld from salaries and investment income, pension contribution, etc), why can‘t the documents be uploaded and filed online with the relevant return?

Another area to watch out for on online tax returns and resulting tax assessments relates to foreign tax credits. For example, if an Israeli resident claims a credit for US tax on US investment income, the ITA‘s online system applies strictly the foreign tax credit tax rules and limitations in the US-Israel tax treaty and the Israeli Income Tax Ordinance, but without showing you how. In one case, it emerged the ITA‘s online system had aggregated the income of the husband and wife resulting in a reduced foreign tax credit. This was eventually remedied.

On the social security side, it is two steps forward, one step back. The National Insurance Institute maintains a totally different online system from the ITA, so it is vital to remember the separate functions and commands. And transparency is weak – it is isn‘t always easy to understand how their system arrived at its figures for amounts paid and those still due.

Sometimes the bureaucracy can be understandable. Recently, a husband with a wife was 8 months pregnant realized they may not get full maternity pay from the National Insurance Institute after the birth because the wife‘s business wasn‘t registered for tax and national insurance purposes.

He tried to back-date the start of his wife‘s business and pay a few thousand shekels in national insurance, with a view to receiving many thousands of shekels as maternity pay after the birth. The National Insurance Institute had a number of questions for the couple, and so did the ITA..

Readers are invited to send me their comments on the efficiency of the Israeli Tax Authority and the National Insurance Institute. If the comments are fit for a family audience, we‘ll try to air them.

As always, consult experienced tax advisers in each country at an early stage in specific cases.

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The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.