In Israel, the authorities are very focused on collecting taxes (I guess authorities everywhere are). As such, the authorities have set up a variety of mechanisms to make sure that they get their money. Thanks to a computer snafu, though, they managed to get some money that wasn’t theirs – including mine!

Most people in Israel (salaried workers) have their income taxes automatically deducted; technically, they don’t have to file a tax return, unless they have an exceptional expense or deduction (average charitable contributions, credits for dependents, etc. are all factored in already). Independent operators/freelancers/self-employed people, on the other hand, file annual returns. Every two months, you are supposed to pay an advance to the Tax Authority; they give you a little book of receipts where you are supposed to fill in the amount of money you earned, and pay a percentage as income tax. That percentage is determined at the beginning of the calendar year, and is based on your previous year’s income.

It makes as much sense as any collection system, but it’s expected that there is going to be some money owed by either side, since by definition a freelancer/self-employed person does not earn the same amount each year from the same employer (otherwise they might as well take a salary). Between varying income, changing business expenses, new dependents (ie children), and other factors, you could be eligible for a hefty refund – or have to pay a hefty amount to cover your obligation.

Having done this for a few years now, I can also say with authority that it depends on the accountant you have, too. I have a good one. Not that he’s a crook or anything, he just knows his way around the tax codes, and has been able to get me a significant refund each year for the past three years!

According to his reckoning, I was supposed to get about 5,000 shekels back this year. They usually send these refunds out by February, but here it is May, and I haven’t gotten mine yet. What I have gotten, though, are dunning letters demanding that I pay them 2,400 shekels!

Now, let it not be said that I don’t do my part as a taxpayer; there are lots of deductions I don’t take on purpose. I’d rather pay them and have them leave me alone. When I got the first letter (they don’t start threatening until the third), I called up my accountant and asked him what had gone wrong – assuming he had miscalculated or something. “Let me check my figures,” he told me – and called back a couple of days later to tell me that he had been right, and the tax people owed me money! “I even called the tax official in charge of your account,” he told me, “and he agreed completely.” So what happened? “Must have been a glitch. I’m sure they’ll clear it up in a couple of days.”

Nope – and I’ve now gotten a fourth letter! I was all set to write them a check, when I saw the article describing exactly what happened. In his annual report, Micha Lindenstrauss said that the Tax Authority had “lost” the deduction eligibility information for a whole slew of taxpayers when implementing a new IT system. Apparently, there a series of different computer systems that the Authority is trying to unite in a single system – a project that has been going on for the last 18 years (!) – and it still isn’t ready.  Now the question is, do I give up, or try to get my money back? Can’t we put some hi-tech entrepreneurs to work on this?

This entry was posted on Friday, May 8th, 2009 at 12:30 pm and is filed under computers, israel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.