Israel loses billions of shekels every year due to tobacco smuggling

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The loss from tax revenues caused to Israel as a result of smuggling and transfers of goods at border crossings with the Palestinian Authority from cigarettes and other tobacco products alone amounts to more than NIS 1.25 billion each year, according to a report by the State Comptroller’s Office published today (Monday). The border. ”

The report also states that according to the Chamber of Commerce, the loss of state revenue from VAT and purchase tax on cigarettes, smoking tobacco and rolling tobacco, in all of Israel’s border crossings, amounted to NIS 1.7 billion in 2017. In addition, Israel loses hundreds of millions every year. Shekels due to loss of goods tax imported into the territory of the state by Palestinian importers but not transferred to the territory of the Palestinian Authority in the official crossings determined. In 2016, the state lost about NIS 450 million due to this phenomenon, in addition to the loss of VAT revenue Reporting.

And what is the penalty for smuggling hundreds of thousands of shekels and even millions of shekels through border crossings? A fine of NIS 2,000 to NIS 4,000. He does not deter smugglers.

The audit revealed significant failures in preventing the smuggling of goods (goods) through border crossings, in preventing the transfer of prohibited goods, in preventing the transfer of goods without lawful documentation in the internal crossings and especially tobacco and its products, which are subject to significantly higher taxes than other goods.

“Some of the failures found may even harm state security,” writes State Comptroller Netanyahu Engelman. “The tax authority’s lack of thorough treatment of tobacco smugglers and its products and the non-collection of the required taxes lead to a large financial loss to the state treasury and even harm – through unfair competition of smuggled merchants – to lawful traders and pay full tax; and a consequent lack of deterrence in these matters.” .

The Comptroller further writes that “the work of the Tax Authority at border crossings and internal crossings is not done optimally, which impairs its ability to deter violations of the law as well as violence against Tax Authority employees at the Allenby Crossing. Therefore the Tax Authority must act without delay The continents. ”

Within the borders of the State of Israel, there are seven international land crossings, which are used between it and its neighbors. In addition to these, there are internal land crossings between the State of Israel and the Palestinian Authority. The role of the Tax Authority in the crossings is, among other things, to enforce the law in everything related to the legality of import and export and to collect taxes. For this purpose, the Tax Authority must inspect people, goods and vehicles passing through crossings, both inside and outside Israel.

From August 2018 to February 2019, the State Comptroller’s Office examined the activities of the Tax Authority in the overland crossings. Various deficiencies were found in the Jordan River, Allenby customs houses and in the internal crossings between the State of Israel and the Palestinian Authority, including deficiencies in the staffing of the customs house by YSM investigators and the lack of a kennel with dogs to locate drugs and money smuggled at some border crossings. The transition to drug and money transfer and deterrence is hampered. It was also found that in practice no drug smuggling was seized at the Jordan River crossing even though Jordan is defined by the state authorities as a country from which there is a fear of drug smuggling. This sharpens the need to examine further and consistent use of dogs for drug detection, “the comptroller writes.

In addition, the audit revealed that in the absence of the Israeli police at the Allenby crossing, the employees of the Tax Authority are exposed to the violence directed against them.

According to the Comptroller’s position, the sanctions imposed for the purpose of enforcing and deterring the commission of offenses, such as administrative fines and financial sanctions, do not deter those who commit offenses at border crossings. Among other things, cases were found in which the value of the smuggled goods was hundreds of thousands of shekels, and in a significant case the value of VAT and the purchase tax on the smuggled goods reached NIS 1.8 million, with administrative fines of NIS 2,000 or NIS 4,000 in repeated offenses.

The case in which NIS 1.8 million worth of goods were smuggled occurred in July 2018, when a truck carrying tobacco products and cigarettes tried to cross a border without proper documentation. The inspectors of the Poultry Board stopped the truck and conducted an inspection and search, in which a commercial quantity of tobacco products was found, such as: rolled cigarettes of Palestinian origin, tobacco in sacks and cigarettes originating from duty-free shops (“duty free”). The value of the purchase tax and VAT alone on the seized tobacco and cigarettes was about NIS 1.8 million, in addition to the expected loss of income tax on the profit from their sale.

The driver was previously caught transporting goods without documentation and even paid a ransom for it. In July 2018, several similar smugglings were seized in the Judea and Samaria area, and these developed into 36 investigation files in preparation for the filing of indictments regarding the transfer of tobacco and its products without legal documentation. An inspection by the State Comptroller’s Office revealed that of the 36 seizures, 30 were made by Poultry Council employees and 6 by Border Police soldiers.

Comptroller Matanyahu Engelman recommended in the report, among other things, that the tax authority should lead a process aimed at preventing smuggling at the crossings and enforcing the tax laws as required.

The tax authority did not respond to comments.

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