Netanyahu orders discussion on canceling NIS 200 bill

Prime Minister Benjamin Netanyahu has instructed the finance minister, the governor of the Bank of Israel, the heads of the Israel Tax Authority and the Arab Community Crime Bureau to hold a discussion on abolishing the 200-shekel bill. The move is expected to help combat black capital and, according to its supporters, will add more than NIS 20 billion to the state coffers. The development comes just two weeks after an exclusive report by Globes that abolishing the 200-shekel bill was under consideration following Finance Minister Bezalel Smotrich’s promise to combat black capital.

According to sources familiar with the matter, there is widespread support among senior government officials, including the head of the Tax Authority, Attorney Shai Aharonovitch, for the bill to be rescinded. “Perhaps their weight and pressure on the matter is what led to the rapid progress of the plan,” the source said. “The authority has been pushing for years to limit the use of cash. The head of the Israel Money Laundering and Terror Financing Prohibition Authority, Attorney Ayelet Ostrovich Levy, also supports the matter, and senior officials in the Finance Ministry have also expressed their support.”

The proposal proposes three main steps to combat black capital. The first and most controversial step is to cancel the 200-shekel banknotes, which according to the Bank of Israel constitute approximately 80% of the value of banknotes held by the public. The Bank of Israel will announce that within a short period of time, these banknotes will be canceled and will no longer be legal tender. Holders of these banknotes will be forced to go to the banks and exchange them for other banknotes, or deposit them into their bank accounts. Supporters of the plan say that “this step will allow for a significant reduction in the amount of cash in circulation and will force tax evaders to report them and pay their money into the state coffers in order to exchange or deposit the banknotes – or lose them.”

The next step is a voluntary disclosure process, which would allow those holding large amounts of cash to deposit it immediately, with “immunity from criminal charges related to failure to report income, and payment of reduced tax without penalties.”

“Builders who have been evading taxes until now will have to stop hoarding cash, and they will have the carrot and stick to start paying taxes legally,” said Adam Reuter, president of Hesonim Finance, who signed the policy proposal. In the long run, the plan aims to achieve a completely cashless society. Under the plan, all the steps will be implemented simultaneously, otherwise “dark capital will move from A to B,” according to Nurit Zeevi, an engineer, entrepreneur and one of the proposal’s signatories.

One criticism of the proposal is the invasion of privacy.

But there are criticisms of the proposal. First, the assumptions in the proposal about the amount of taxes that will be collected are overly optimistic, as some of the capital could be exchanged for other banknotes, valuables, or decentralized digital currencies like Bitcoin. But according to supporters, “the value of the 100-shekel bills in circulation is only one-fifth of the value of the 200-shekel bills. In addition, if you are a criminal organization, you should start moving bundles of 100-shekel bills and this starts to create a larger intelligence footprint. The plan requires the Bank of Israel not to increase the amount of 100-shekel bills in circulation, which will lead to their availability becoming less available, and people will choose to use digital means more.” Regarding Bitcoin, supporters of the plan say: “Let’s see criminal organizations specialize in Bitcoin and their members pay kindergartens and supermarkets with Bitcoin.”

One criticism of the drastic reduction in cash use is the violation of privacy, which today allows cash to be used even in legitimate cases. “Yes, freedom is important and includes the right to privacy, but in a digital world where all transfers are primarily made through banks, there are few standardized transactions with cash,” say proponents of the plan. “Privacy has been mostly dead for decades, and we have given it all to corporations.” While they acknowledge that there has been some damage to what privacy remains, they add: “When you weigh the cost against the great benefit in combating black capital and criminal organizations, it is worth it.”

“I don’t think there is anything to say on this matter at the moment,” said a source close to Finance Minister Bezalel Smotrich.

This article was published in Globes, Israeli Business News – en.globes.co.il – on September 20, 2024.

© Copyright Globes Publisher Itonut (1983) Ltd., 2024.