A new law limiting how much From the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More can be paid in Money in physical form such as banknotes and coins. More has taken effect in Israel January 1st, 2019. According to the law’s main provisions, it is forbidden for dealers/suppliers to make a business transaction above 11,000 NIS (about 3,000 USD), while private individuals would be limited to an amount of 50,000 NIS (about 14,000 USD). Tourists, on the other hand, would be allowed to trade in cash up to 55,000 NIS (over 15,000 USD). Any transaction above this amount would have to be done through electronic means of A transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More, a bank transfer or by checks.
The Israel Tax Authority recently launched an information media campaign to notify the public of the new law’s provisions with the slogan, “You break the cash law – you pay dearly“. This seemingly stern reminder was not, however, as controversial as the fact that cash would now be limited. Decades of employment instability, limited access to banking services and difficulties to get mortgages have led the Israeli Arab public to rely mainly on cash. It is therefore not surprising that the new restrictive law sent shockwaves across the country.
This situation portrays a stark difference between the Jewish and Arab populations where the former manages its financial activities through bank accounts. Although bank branches have opened in Arab Israeli villages in recent years, the use of cash has long been a common practice and is considered a main source of The Eurosystem comprises the European Central Bank and the national central banks of those countries that have adopted the euro. More. In fact, individuals often prefer to accumulate cash in money boxes – acting like long-term “saving deposits” – for historical and contextual reasons.
First, the digital revolution that changed the face of banking was not assimilated in the Israeli-Arab population in the same way as for Jewish-Israelis. Many Arab individuals, particularly the older generation, still face difficulties in operating a bank account through digital tools — often needing the assistance of a teller, even at the price of standing in the line for hours. Second, the Arab-Israeli population lacks accessibility to banking mortgages, where only 2% of mortgage loans were granted in 2017 despite them accounting for over 20% of the population of Israel. In addition, interest rates in the Arab sector are higher compared to the Jewish sector because of greater business risks due to housing and land issues when registering assets as collaterals. Consequently, these factors have played a crucial role in the strengthening the already cash-heavy culture of Arab-Israelis. Indeed, cash continues to be used for acquiring assets such as cars and apartments – making the Arab-Israeli youth one of the first targets of the this law as it deprives them of the assets saved for use at the time of their age to marry.
If one were to total the amount of cash accumulated in the Arab sector, the limit has beyond exceeded the maximum amount permitted for a simple bank deposit, making the possession of a bank account no longer practical.
One begins to question whether Israeli legislators took this complex reality into consideration. In an attempt to bring forward a solution, several experts suggest to carry out an “anonymous voluntary disclosure” while postponing the new cash law by one year. Although ambitious, this was far from realistic as both the Arab public and tax authorities would not accept it.
Sadly, since January 1st 2019 the majority of Arab-Israelis can now by definition be considered as breakers of the law.
A parte – The cashless conundrum
A man from one of Israel’s Bedouin villages was charged for tax evasion following a court session. As a result, his bank account was blocked by the Tax Authority. The parties came to an agreement that he must pay a fine of 15 million Shekels, and that he can settle his dues in cash (about US $400,000) in monthly installments at the Israel Post Bank. Everything was going smoothly, with him settling his debt in monthly installments of 200,000 Shekels (about US $60,000) until, in January 2019, three weeks after the coming into force of the new cash restriction law, an absurdity occurred. The defendant presented himself at the Post Bank to settle his last installment, but the bank refused to accept his payment because it was in cash and exceeding the limit of 11,000 Shekels. Because his bank account was already blocked by the Tax Authority, the defendant did not have the means to settle his final payment neither by check nor by bank transfer. Meanwhile, the Tax Authority declared to the court that, should the debt go unpaid, the agreement would not be finalized and the defendant’s sentence would be increased, which could result in jail time of up to two months.
After endless discussions, and despite the fact that the Tax Authority clarified that tax payments are not subject to the new law, the Israel Post Bank continued to refuse executing the cash payment. As a result, the Tax Authority was obliged to work around the new law and issued 18 vouchers of 10,000 Shekels for immediate payment to overcome the administrative conundrum of the new legislation. The good news is that the court finally confirmed the The discharge of an obligation in accordance with the terms of the underlying contract. In e-transfers the settlement may take days, whereas cash settlements are instantaneous and irreversible. More, but there is no doubt that a revision of the new law is the least that has come out of this story.
To read the full story [in Hebrew], click here.