Israeli Tax Authority Wants 'A Piece Of The Action' On Kabbalists, Issuers Of Charms And Amulets, Others

Israel’s Tax Authority announced it will begin to crack down on haredi kabbalists who charge fees or take money for blessings, the Times of Israel reported. The crackdown will also include cantors, mohels,  “distributors or sellers of charms, holy water, or other holy objects,” and private haredi hechshers (non-state-employed providers of kashrut supervision).
In the past, kabbalists have occasionally been prosecuted for tax fraud and hiding income. But enforcement of the law was sporadic at best.
So why the change now?
Last year Israel’s State Comptroller, Yosef Shapira, found in his annual report that “kabbalists who are earning hundreds of millions of shekels a year, if not more…do not report the money they received as ‘donations’ or ‘tips’ as income.” Shapira’s report also found that yeshiva heads, local non-state-employed rabbis, and the heads of private kosher supervision services were also failing to declare large amounts of income. Almost all of those rabbis are haredi.
“Providers of religious services will be required to follow all the rules involved in monetary transactions, such as the issuance of receipts, providing the Tax Authority with reports of activities, and presenting information when required on the sources of income, bank account deposits, and other assets, both in Israel and abroad,” the Tax Authority statement noted in a statement released today.
Shapira reportedly noted that when the government occasionally prosecutes this tax fraud, defense attorneys claimed the money was given as “gifts” and that it wasn’t an actual fee under the law. Therefore, they claimed the money should not be taxable.
Often the state tried to iron out deals with the rabbis so it could recover a portion – often a very reduced portion – of the tax money it is really owed by the rabbis.
In a statement issued today, the Tax Authority set down in writing the differences between a “gift” and a “fee.”
• Was the service provided as a one-off favor? Or was it provided as part of an established “business”? If it is the latter, the money is taxable income. If it is the former, it may be non-taxable.
• Do the service providers serve a large clientele? Do they seek clientele in part through advertising on posters, or newspapers and radio stations? If so, the income is likely taxable.
• How much income service providers make from their supposedly altruistic business? If the amount is sizable, the income is likely taxable.
• Do the service providers “have specific talents or skills that they are using in the provision of their service? Are they earning their income from the exercise of those skills? What is the effectiveness of their activity based on the skills or the spiritual invocations attributed to them?” How these questions are answered (and what investigation determines) “will determine the commercial nature of these service providers’ activities and whether the income should be seen as attributed to a business or career.”
The Tax Authority’s statement also reportedly noted that “the time factor between when money is handed over and when a service is performed will be taken into consideration when determining the nature of monetary activity. In addition, a distinction will be made between a payment for a specific service, and a donation that is given to an institution or an individual as a gift to thank them for assistance.” But determination of whether money given to service providers was a “gift” or a “fee” will, the Tax Authority noted, have to be determined on a case-by-case basis.
Many of Israel’s richest rabbis – including some worth tens of millions of dollars and at least one worth hundreds of millions – are Sefardi haredi kabbalists who make their money through promising to pray for followers who come to them in distress – prayers many say are contingent on the desperate followers giving the rabbis large amounts of cash.