Saturday, 31 May 2014

No Cash Please




Did you know that 23% of Israel's economy is black market?

For comparison, according to Globes, developed Western economies are around 10% black-market.

This huge amount of black market money means the State of Israel is losing out on 30-40 BILLION shekels of tax revenue each year.

Adding these missing funds to the budget would significantly increase Defence, Education, Health, Transport and many other aspects of Israel's national needs.

Also, in light of high-profile recent bribery and corruption scandals in Israel, the use of large sums of cash has been a back-door for crime and corruption.

According to a new proposal from the Harel Locker Committee on financial reform, the use of cash will be limited for business transactions to 7500 NIS, and later further restricted to 5000 NIS.

Private individuals will be limited to 15,000 NIS cash spending.

For individuals, I can think of buying cars, apartments, weddings/simches - as some of the few transactions which would be impacted by the new regulations.

I think the new measures sound reasonable and indeed very beneficial to the government and public.

Perhaps it is time for Israel to set a globally-pioneering path for removing cash from the economy altogether.

Once untraceable-cash is out of the equation, black marketeers and criminals will be much more limited in their day-to-day business.

Credit and debit cards (which don't currently exist in Israel, and are also recommended by the committee), e-commerce, checks and bank transfers should give quite enough options for getting rid of venerable coins and bank notes.

12 comments:

  1. Eliminate cash and the black market will become a barter system.

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  2. Mark has a good point but probably only for smaller amounts of money. It's harder to imagine purchasing a house by bartering.

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  3. How about overhaul the tax system so that it is less Byzantine and more in line with Western standard..We have to remember that only a few years ago, the income tax authorities were parking outside of shopping malls and confiscating cars where they found that the owners owed back taxes (without right or appeal, etc.). And, on the same token, we need to ask about the family court system in Israel where a man earning an average salary of 8,000 shekels who has 3 children, can be left with 1500 shekels a month post taxes after he divorces (because there is no standard cap based on percentage of income). How is he supposed to support himself 100% legally? This solution does not even come close to addressing the root problems.

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  4. Based on the asinine and shallow nature of this analysis and its complete and utter failure to take into account the root problems behind the existence of a black market economy, I am now removing this blog from my feed. I am also reassessing my horaat keva to Lemaan Achai.

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  5. Based on your contemplating nixing one of the the most well run, effective, ethical tzedaka organisations because you don't like David's tax analysis, I believe you are asinine and shallow. But of course you won't read this cos you've left the blog. Lehit.

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  6. Actually, I am planning for a while on switching allegiance to the Kupa, based primarily on their ratio of actual tzedaka given versus money spent on staff salaries...but this high handed analysis sealed the deal.

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    1. ...and if you think anyone believes you've got a horaat keva to lemaan achai or that anything but politics would make you consider that switch, I've got a bridge to sell you.

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  7. Actually, I do still have one. I am also not Charedi (I voted against Shas not for Cohen), and I classify myself as dati but no longer leumi.

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    1. And your first name begins with...let me guess.."J"?

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  8. No, it begins with M.

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  9. I would guess that most black transactions don't involve a large amount of money - big deals are inherently more difficult to keep secret, Therefore, I am not sure how effective this rule will be.

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  10. This is a very simple issue. Regardless of law or regulation, when there are two parties who are willing to engage in a transaction they will do so legally or illegally. It becomes illegal when the taxes and regulations are so onerous that they decide doing it legally is not desirable. The existence of a black market demonstrates that taxes and regulations in Israel need to come down so that it is more worthwhile to effect these transactions in public. Going to a non-cash market instead is ridiculous and misses the point. This has nothing to do with morality or patriotism; all commerce is amoral.

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