Israeli Law Restricting Cash Use Goes Into Effect

Israeli shekels

Israeli Law Restricting Cash Use Goes Into Effect

Israeli law limiting cash use for purchases or payment of wages has gone into effect in January 2019 and violators could face up to 3 years in jail.

  • Under the law, which was passed last March, the caps on the usage of cash for transactions or payments of wages are NIS 11,000 ($2,934) for businesses or employers, and up to NIS 50,000 ($13,334) for transactions between private citizens.
  • For transactions or payments over NIS 11,000 ($2,934) for businesses or employers, cash may only be used for up to 10% of the total price, or up to NIS 11,000 , whichever is lower. For example, a 50,000 shekel exchange, up to NIS 5,000 may be given in cash, or 10% of the total value.

In the explanation to the law it is stated that “the use of cash has been recognized in Israel and abroad as the “fuel” driving the black economy. “Black economy” or “shadow economy” is defined as a share of economic activity that does not appear in the GDP data. It includes activities and income outside the legal framework of the state, most of which are not reported to the authorities in order to avoid fulfilling the duties imposed on all citizens. The illegal activity associated with the black economy is diverse and includes tax evasion, criminal activity, money laundering, financing terrorism, and the like.

The black economy in Israel leads to a loss of tax revenues estimated at billions of shekels annually. It should be noted that the damage to Israel’s economy and society from the existence of a black economy is not limited to the economic loss alone. A black economy undermines social cohesion and national strength and undermines the legitimacy of the rule of law and government. The phenomenon of the black economy is a barrier to free competition and economic growth, and causes a lack of equality in the burden of paying taxes, which, beyond the injustice inherent in it, places a heavier burden on law-abiding citizens.”

To ease the transition, penalties will not be imposed before October 2019, unless the violator is caught twice.

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