New legislation introducing stricter restrictions on payments with large sums of cash will come into effect in Israel on Monday. The aim, as stated by the country’s tax administration, is to improve the fight against organized crime, money laundering and tax evasion. Critics doubt the law achieves this.
Israeli authorities crack down on cash purchases, introduce lower limits
Payments of large sums of money by cash and bank checks will be further restricted in Israel by amendments that will come into effect on August 1. The tax authorities want to further reduce the circulation of cash in the country, hoping to curb illegal activities such as illicit money laundering and tax non-compliance, The Jerusalem Post reported.
Under the new law, companies will be required to use non-cash methods for any transaction over 6,000 shekels ($1,700), a notable decrease from the previous cap of 11,000 shekels ($3,200). The cash limit for individuals who are not registered as business owners will be NIS 15,000 (nearly $4,400).
Reducing the use of cash is the main goal of the law, according to Tamar Bracha, who is responsible for enforcing the rules on behalf of the Israel Tax Authority. Quoted by the media Media Line, the manager explained:
The goal is to reduce the fluidity of cash in the market, mainly because criminal organizations tend to rely on cash. By limiting its use, criminal activity is much more difficult to carry out.
However, a lawyer representing clients in a 2018 challenge against the law, when it was first passed, insists the main problem is that the legislation is not effective. Uri Goldman referred to data showing that since the law was originally introduced, the cash amount has actually increased. Highlighting another of its downsides, the legal expert further explained:
When the bill was passed, there were more than a million citizens without bank accounts in Israel. The law would prevent them from doing business and turn almost 10% of the population into criminals.
An exemption for trade with West Bank Palestinians and charities active in ultra-Orthodox communities has also sparked controversy. Transactions involving large sums of money will be allowed in these cases, provided that they are duly reported to the tax authorities. Goldman thinks it’s unfair to the rest of society.
The Ministry of Finance also wants to limit private liquidity
In its original draft, first proposed in 2015, the law also included a provision limiting the private possession of large sums of cash to 50,000 shekels ($14,500). Although it was abandoned at the time, Israel’s finance ministry is now considering reintroducing it and letting parliament decide whether to adopt it after the next election.
Uri Goldman also believes authorities should at least allow people to declare their money and deposit it in a bank account. This idea was also suggested during the preliminary discussions on the legislation, but was never approved. Otherwise, the cash will remain in circulation even if it is not used as before, he noted.
Meanwhile, the Bank of Israel has been exploring the possibility of issuing a digital shekel, another form of national fiat said to have characteristics similar to cash. The majority of respondents to public consultations conducted by the monetary authority backed the plan, with results released in May revealed.
Do you think the new law will limit the use of cash in Israel? Share your expectations in the comments section below.
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