Bitcoin investors owe over 300 million Shekels to the Israeli Tax Authority in unpaid taxes from their earnings-related to bitcoin and cryptocurrency investments, however, banks in Israel are standing in the way of them paying their taxes.
Israeli Tax Authority Losing on Tax Revenues Because of Banks
The Israeli Tax Authority and banks are not on the same page regarding the treatment of cryptocurrencies, and this is posing an obstacle for taxpayers who are willing to pay taxes on earnings from their cryptocurrency investments. At present, there are no set regulations around Bitcoin and other cryptocurrencies and this has restricted banks from dealing with clients or customers seeking financial services while trying to deposit earnings made from bitcoin investments.
Reaction of Bitcoin Investors on the Situation
A typical example of this scenario is the case of Hapoalim bank’s customer, Ron Gross who has made handsome earnings from trading bitcoin since 2011. He would deposit the dollars converted from Bitcoin into a Swiss Bank account and then convert the dollars into shekels to put in his local bank account.
At the end of 2017, however, his bank began to refuse accepting deposits relating to his bitcoin earnings to his local bank account.
As Ron needed the Israeli shekels to file his taxes, this made it impossible for him to pay his taxes for a long time. His cryptocurrency earnings are still held up in U.S. Dollars in a Swiss bank.
This is one of the many cases of bitcoin investors in Israel being unable to pay their taxes. The inability of cryptocurrency investors to file their taxes represents double losses for the tax authority – it is not only losing out on tax revenues but valuable information about activity around cryptocurrencies as well. At present, the tax authority subjects profit from trading cryptocurrencies to a 25% capital gains tax for individuals and a 47% corporate tax rate for corporations
BOI’s Supervisor of the Opinion that Banks should Not Resort to Extreme Measures
In the case of Bits of Gold, Israel’s largest cryptocurrency case and Bank Leumi, where the bank asked the exchange to close its account and later restricted its activities after a year of operation, the Bank of Israel did not intervene but shared its opinion on the situation. The Bank of Israel’s supervisor said that while cryptocurrencies represented a high risk for abuse, it was up to the banks to take the necessary precautions and not take extreme measures like closing accounts.
Banks in Israel need to examine cryptocurrencies and work towards establishing a regulatory framework based around banking services related to them. However, until such regulations are designed and approved, banks will continue to maintain their position on an opinion published jointly by Israeli financial regulators five years ago that warned the public and the banks about the heightened risk of cryptocurrencies as tools for money laundering and even terrorist financing.