Israel faces billions in tax losses due to poor crypto tax enforcement, with calls for urgent reforms and better regulation.
Israel is facing a massive loss in tax revenues due to problems in taxing digital currencies. A new report from the State Comptroller and Ombudsman was released. It reveals alarming details about the country’s handling of crypto taxes.
From 2018 to 2022, Israel lost an estimated NIS 2 to 3 billion a year in tax revenues. This is due to poor tax enforcement and failure to monitor crypto transactions properly. According to the report, only a few crypto holders declared their earnings. Among the 200,000 estimated digital currency users in Israel, only 0.25 percent filed tax returns during the period covered by the report.
The report highlights one of the fundamental problems: a lack of participation in a new tax payment system launched by the Israel Tax Authority (ITA). In December 2023, the ITA began a special procedure that enables taxpayers to directly pay their crypto-related taxes into the ITA’s account at the Bank of Israel. However, crypto holders did not participate in the initiative.
Israel Faces Growing Crypto Tax Challenges Without Stronger Policies
The report also criticizes Israel for not joining the OECD’s Common Reporting Standard for Crypto Assets (CARF) and for low tax compliance. The international program allows countries to exchange information about crypto transactions to fight tax evasion. If Israel refuses to join CARF, the OECD may put it on a blacklist. Such a move would damage Israel’s reputation, making tracking and collecting taxes on crypto assets harder.
The State Comptroller’s report urges Israel to take immediate action. It urges the Bank of Israel to facilitate tax payment on crypto earnings and the ITA to work more closely with the Israel Money Laundering Prohibition Authority (IMPA) to improve the crypto tax system.
This report comes as digital currencies are growing in popularity in Israel and worldwide. As crypto popularity rises, so does the difficulty of regulating it. Israel may continue to lose significant tax revenues without stronger policies and better enforcement.
Lastly, the State Comptroller has called for reforms to address the growing issue of crypto tax compliance. The findings highlight the urgent need for Israel to modernize its approach to digital currencies. Without action, the country could face ongoing financial losses.
