1 See Yoran, A., “Amendments to the Income Tax Ordinance in 1974—the Missing Reform” (1974) 29 HaPraklit 422, 639Google Scholar; Rubinstein, “How I Became a Criminal” Ha'aretz (17.7.71); Vermos, N., “The Problems of Obeying the Income Tax Law” (1968) 3 Riv'on Leinyanei Missim (Quarterly Tax Journal in Hebrew, hereinafter referred to as Q. Tax J.) 275Google Scholar; Aloni, S., “Educating Towards Awareness of the Justice in Taxation” (1968) 3 Q. Tax J. 205.Google Scholar

2 Letter of Minister of Finance of 15 December, 1974, to Messrs. Ben Shahar, Bruno, Ben Porath, Ronel and Nahir, the members of the Ben Shahar Committee, published together with the Ben Shahar Committee's recommendations.

3 Published by the Government Printer, Jerusalem, in booklet form. All references to the Recommendations are made to this booklet.

4 H.H. no. 1188, p. 324; H.H. no. 1187, pp. 314–316; H.H. no. 1189, pp. 366–368.

5 The following laws were promulgated in order to effect the Reform: Law for the Amendment of the Income Tax Ordinance (No. 22), 1975, S.H. no. 774, p. 168 (hereinafter referred to wherever the term “Reform” is used); Law for the Repeal of War Loan, 1975, S.H. no. 774, p. 194; Law for the Amendment of the Income Tax Ordinance, 1958 (Amendment), 1975, S.H. no. 773, p. 158; Law for the Encouragement of Industry (Taxes) (Amendment No. 4), 1975, S.H. no. 773, p. 164; Defence Loan Law (Approved Enterprises) (Amendment), 1975, S.H. no. 773, p. 165; Law for the Encouragement of Capital Investments (Amendment No. 13), 1975, S.H. no. 773, p. 166; Law for the Encouragement of Savings, Reductions in Income Taxes and Guarantees of Loans (Amendment No. 3), 1975, S. H. no. 773, p. 166.

6 A. Yoran, supra n. 1, at pp. 436–437; Neeman, Y., The Tax Consequences upon Conversion of Property's Use (Oceana, Schocken, 1970) 5–12Google Scholar; Lapidoth, A., Evasion and Avoidance of Income Tax (Tel Aviv, 1966) 16–31Google Scholar; Witkon, A. and Neeman, Y., Tax Law (4th ed., 1969) 57–137.Google Scholar

7 Ma'ariv (14.8.75), p. 20. See Mualem, , “Curtailing Business Expenses for Income Tax Purposes” (1971) 6 Q. Tax J. 78Google Scholar; Ramati, A., “The Apparent and Latent Income of Employees” (1971) 6 Q. Tax J. 82Google Scholar; The Asher Committee Report (1972) Booklet No. 4, pp. 3, 5; Gabay, J. and Arian, A. “Tax Benefits and the Erosion of the Tax Base” (1974) 9 Q. Tax J. 81.Google Scholar

8 Under the arrangement between the Treasury and the air crews, an English Pound (Sterling) and a United States Dollar were, for Income Tax purposes, valued at one Israel Pound. At a time when the real value of an English Pound approached fifteen Israel Pounds and the United States Dollar was officially valued at more than six Israel Pounds, this was a most substantial concession. As this article goes to press the air crews are waging a battle to retain their net income, irrespective of the Reform—a battle which has met with widespread public opposition.

9 (1969) (I) 23 P.D. 186; Supplementary Discussion (1970) 3 P.D.A. 237. See M. Menahameni & Sons Ltd. v. Assessing Officer (1970) 3 P.D.A. 228; Doply Ltd. v. Assessing Officer (1971) 4 P.D.A. 273; “Zikit” Mifalei Zvia VeAshpara (1972) 5 P.D.A. 230.

10 (1960) 14 P.D.A. 2088; Paz Gas Hevra LeShivuk Ltd. v. Assessing Officer (1967) 1 P.D.A. 71; Pardes Syndicate Shel Megadlei Hadar Ltd. v. Assessing Officer (1971) 4 P.D.A. 299; Hevra Meuchedet LeTayarut Ltd. v. Assessing Officer (1968) 2 P.D.A. 31.

11 Income Tax Regulations (Deduction of Certain Expenses), 1972, K.T. no. 2865 p. 1337.

12 Sec. 2 of the Reform. The Bill had originally proposed that the Minister of Finance be empowered, with the approval of the Knesset Finance Committee, to exempt from tax, payments enumerated in the new sec. 2(2). The Reform however, exempted only such payments which are allowed as a deduction to the employee. It appears that the employee will have to include the reimbursement in his gross income and claim the deduction on his personal tax return—see sec. 59 of the Reform.

13 Income Tax Regulations (Value of Car Usage), 1975 K.T. no. 3377 p. 2405.

14 Sec. 1 of the Reform.

15 Ibid.

16 See Neeman, Y., The Tax Consequences of Devaluation—The Approach of the Israel Law (Tel Aviv, 1969)Google Scholar; Yoran, A. and Flumin, E., Tax Planning in Business Life (Tel Aviv, 1973) 140–144.Google Scholar

17 Amcor Ltd. v. Assessing Officer (1957) 11 P.D. 886; Ilanit Ltd. v. Assessing Officer (1966) (I) 20 P.D. 243; B & W Ltd. v. Assessing Officer (1966) 51 P.M. 368; Assessing Officer v. Aled Ltd. (1968) (I) 22 P.D. 470; Ziss v. Assessing Officer (1969) 2 P.D.A. 421; Gurewitz Estate v. Assessing Officer (1966) (IV) 20 P.D. 594; Ramet Ltd. v. Assessing Officer (1969) 65 P.M. 110.

18 Assessing Officer v. Raviv Bros. & Gottlieb Ltd. (1969) 3 P.D.A. 41; Taro Pharmaceutical Industries Ltd. v. Assessing Officer (1969) (I) 23 P.D. 102; Ta'asiot Even VeSid v. Assessing Officer (1972) 5 P.D.A. 115; Haargaz v. Assessing Officer (1974) (II) 28 P.D. 190; Nir Ltd. v. Assessing Officer (1965) 47 P.M. 114; Assessing Officer v. Semel Shipping Ltd. (1967) (I) 21 P.D. 622.

19 Rassco Ltd. v. Assessing Officer (1964) 40 P.M. 401; Assessing Officer v. Chevra LeHashkaot Keva Ltd. (1967) (II) 21 P.D. 29; Israel Phoenix Insurance Co. v. Assessing Officer (1967) (I) 21 P.D. 660; Bank for Industrial Development of Israel v. Assessing Officer (1967) 2 P.D.B.M. 223.

20 Exactly such an attempt failed in Assessing Officer v. Aled Ltd. (1968) (I) 22 P.D. 470.

21 Sec. 2(2) of the Reform. See Recommendation E-9 of the Ben Shahar Committee.

22 Sec. 5(6) of the Reform. This amendment was not proposed by the Ben Shahar Committee. It should be noted that under new sec. 17(1) (sec. 11(1) of the Reform), linkage differences are allowed as a deduction if incurred in the production of income, except where rate differences are paid by a company to a non-resident controlling shareholder. Prior to the amendment, case law decided that linkage differences paid on a loan are of a capital nature (except in the case of financial institutions), while payments of linkage differences on accounts payable for inventory are deductible as current expenses. See, Commissioner v. Lod Cigarette Factory Ltd. (1960) 14 P.D. 2125; Assessing Officer v. Irgun Hakeniot Shel Moshavei Hadarom (1966) (IV) 20 P.D. 902; Wissotzky Tea & Co. (Israel) Ltd. v. Assessing Officer (1965) (IV) 19 P.D. 288; cf. Assessing Officer v. Veneta Ltd. (1961) 15 P.D. 2081; Suliatan v. Assessing Officer (1973) 6 P.D.A. 216. Statutory relief was granted in Income Tax (Deduction of Linkage Differentials) Law, 1964, 18 L.S.I. 72 as amended, in 18 L.S.I. 169, and later in the Law for the Encouragement of Industry (Taxes), 1969, 23 L.S.I. 253 as amended in 24 L.S.I. 160 and (1974) S.H. no. 732, p. 68 and (1974) S.H. no. 733, p. 76. See Avna (Trust) Ltd. v. Assessing Officer (1970) 3 P.D.A. 234; “Diana” Cosmetic Institute Ltd. v. Assessing Officer (1971) 4 P.D.A. 326; “Elco” Israel Electro-Mechanical Industries Ltd. v. Assessing Officer (1972) 5 P.D.A. 208; Winograd, G., “Statutory Enactments Following Devaluation” (1971) 6 Q. Tax J. 293.Google Scholar A Bill is now pending to exempt from tax sums received on insurance policies, insuring against devaluation losses on loans made by non-residents in foreign currency; sec. 1, Law for the Amendment of the Income Tax Ordinance (No. 24), 1976, H.H. no. 1228, p. 168.

23 Sec. 3(3) of the Reform. See also, secs. 4, 5(5), 10 and 12 of the Reform.

24 Sec. 3 of the Reform.

25 The Ben Shahar Committee had recommended that such contributions be taxable to the employee on their payment. The Bill followed the Recommendation, however, the Reform adopted the approach outlined above.

26 See Ben Shahar Committee's Recommendation B-7, which spoke solely in terms of employer-employee relationship.

27 Sec. 3 of the Bill.

28 Sec. 5(6) of the Reform. The Bill, in sec. 5, fixed the amount at IL.500 per annum. The Ben Shahar Committee in Recommendation B-10 proposed that the exemption be granted where the reduction does not exceed 20% of the fair market value, provided that the reduction does not exceed IL.500 per annum. See Income Tax Regulations (Determination of Interest Rate) 1975, K.T. no. 3392, p. 2564. It appears that the original intention of the legislature was to limit the amount to IL.720 but in drafting the law an error was committed and hence the IL.720 exemption is granted twice with respect to two classes of income. A recent amendment to the Reform exempts IL. 1440 per annum received in the form of low-priced meals by employees at the premises of their employers; sec. 1, Law for the Amendment of the Income Tax Ordinance (No. 23) 1976, S.H. no. 793, p. 86.

29 Sec. 52 of the Reform. Prior to the Reform, sec. 123 of the Ordinance provided that wages for night shifts be taxed at 22% and that overtime payments approved by the Minister of Finance following the recommendation of a special committee be taxed 27.5%. These rates were applied only to a certain part of overtime and nightshift hours expressed in relation to the ordinary wages of the employee. Widespread use of “overtime payments” with the acquiescence of the Treasury was made in order not to increase regular wages and at the same time augment net wages. See Ben Shahar Committee Recommendation B-4 which also applies to extra-legal concessions granted under the Law.

30 Sec. 57 of the Reform. Prior to the Reform, the Ordinance provided that premiums for increased productivity be subject to a 20% tax, provided that no tax break be given where the said payments exceed 30% of the employee's wages. See Ben Shahar Committee's Recommendation B-4. The Committee points out that employers and employees attempted to make use of these incentives in order to raise the employee's after-tax income, while allowing the employer a deduction without suffering an appropriate increase in wages.

31 Sec. 5(6) of the Reform. The Bill had originally proposed that the full amount of such compensation be taxable in the hands of the employee. This proposal was in line with the Ben Shahar Committee's Recommendation B-5. Sec. 17(1) of the Reform annulled former sec. 32(8). Hence, compensation paid on wage freezes will now be allowed as a business expense. Interestingly, the full amount paid, and not the amount included in the employee's taxable income, will be allowed as a deduction.

32 Sec. 6 of the Reform. The Reform follows Recommendation A-16 of the Ben Shahar Committee. It is worthwhile noting that in Recommendation A-17, the Ben Shahar Committee proposed the establishment of a special committee to review the collective labour agreements upon which raises due to cost-of-living increases were due. A committee headed by Dr. Sussman of the Bank of Israel was established and has filed its report, the discussion of which is beyond the scope of this article.

33 Sec. 7 of the Reform. Prior to the Reform, the Minister of Finance was empowered, subject to the approval of the Finance Committee of the Knesset, to exempt, or partially exempt, from tax, income derived in development areas. The Reform does away with the total exemption of such income, however, such income may still be partially exempted. The Bill explains that the amendment was designed in order to allow for compliance with Recommendation A-12 of the Ben Shahar Committee, in accordance with which special personal credits would be allowed against the tax on income derived in development areas. The Committee suggested that the rates be reduced by 2 to 7 per cent on income derived in development areas from personal exertion on income exceeding IL.36,000. The Committee also proposed that the number of categories of development areas be reduced, and that the method adopted be as simple as possible. For regulations in effect prior to the Reform see: (a) Income Tax Regulations (Exemption from Tax and Reductions on Incomes of the Residents of Eilat) 1956, K.T. no. 590, p. 576 (amended 14 times, latest (1974) K.T. no. 3201, p. 1516); (b) Income Tax Regulations (Exemption and Reductions in Certain Settlements and in Nahal Settlements) 1974, K.T. no. 3201, p. 1512 (amended twice, latest (1975) K.T. no. 3305, p. 1100); (c) Income Tax Regulations (Exemption and Reductions from Tax on Income in Newly Settled Areas and in Development Areas) 1961, K.T. no. 1143, p. 1726 (amended 20 times, latest (1975) K.T. no. 3316, p. 1279).

34 Sec. 8 of the Reform. Prior to the Reform, IL.500 per annum were exempt from tax if derived by an employee and if subject to withholding at source. See Income Tax Regulations (Exemption from Tax of Additional Income) 1961, K.T. no. 2405, p. 1606 (amended latest K.T. no. 2974, p. 832). This section should be read together with sec. 61 of the Reform which annulled sec. 134 of the Ordinance. Sec. 134, prior to its annulment, empowered the Minister of Finance, with the approval of the Finance Committee of the Knesset to exempt taxpayers relieved from tax under former sec. 12, from the duty to file annual tax returns.

35 Sec. 5(6) of the Reform. Such payments have now been allowed as a deduction from income where the taxpayer maintains proper books and records. Sec. 11(2) of the Reform. The Reform follows Recommendation J-1 of the Ben Shahar Committee.

36 See Witkon, A. and Neeman, Y., Tax Law (4th ed., 1969) 138–183.Google Scholar

37 See Meonot Rothschild v. Assessing Officer (1972) 5 P.D.A. 95.

38 Sec. 17(2) of the Reform. In effect, this section may become an escape hatch for certain income of employees, where the denial of the deduction is inconsequential to the employer (e.g. years of losses which will offset income in many years to come). For, one can envisage the establishment of a pool of cars (i.e. that the cars of the employer will not be assigned to a specific employee) with employees using a different car from time to time. Moreover, in such a situation, the section as now drafted only bars the deduction of the amount which would otherwise be included in the employee's income, and not sums in excess of such amount. Where the taxpayer is a non-profit organization, a tax of 50% will be levied on the disallowed expenses, sec. 3(f) of the Ordinance as amended by sec. 3(2) of the Reform. See also sec. 73 of the Reform amending sec. 181b of the Ordinance and in accordance with which an advance of 50% is due on such sums where paid by profit-making organizations. See Income Tax Regulations (Advance Payment for Excess Payments) 1972, K.T. no. 2876, p. 1447, and Batei Mirkachat Meuchadim Ltd. v. Assessing Officer (1974) 7 P.D.A. 131.

39 This section assumes special importance after the Reform in that most probably attempts will be made to shift income from one category to another, while the payment of larger “salaries” may be unbeneficial due to the taxes and compulsory loans imposed on employers as well as the National Insurance contributions, the conversion of dividends into rental or interest may prove atrractive. See Witkon, A. and Neeman, Y., Tax Law (4th ed., 1969) 162Google Scholar, and Nagid v. Income Tax Commissioner (1966) (III) 20 P.D. 287.

40 Sec. 14 of the Reform. See General Recommendations in Part B of the Ben Shahar Committee's report. Prior to the Reform, sec. 20 of the Ordinance provided a standard deduction of 5% of the taxpayer's employment income, not however, in excess of IL.600 per annum, where the taxpayer elected not to claim deductions pursuant to sec. 17 of the Ordinance.

41 Sec. 11(1) of the Reform. It is to be regretted that the deduction was disallowed to companies paying rate differences to controlling non-shareholders. It is difficult to understand why such rate differences which are tax-free in the hands of the non-resident (sec. 5(6) of the Reform) must bear tax at the company level and thus increase the tax burden of all the other shareholders of the company. Query whether rate differences can be accrued as devaluations occur where the maturity date is still far ahead.

42 Sec. 11(2) of the Reform. See Recommendation J-1 of the Ben Shahar Committee.

43 Sec. 11(2) of the Reform. This enactment is a departure from case law, see Moller Textile (Israel) Ltd. v. Assessing Officer (1970) 3 P.D.A. 69, and follows Recommendation H-7 of the Ben Shahar Committee. See Nahir, B., “Deduction of Legal Expenses in Tax Cases” (1967) 2 Q. Tax J. 23.Google Scholar

44 Sec. 13 of the Reform. The provisions of sec. 19 are somewhat more complicated than described above, however, a detailed analysis is beyond the scope of this article. Interestingly, these provisions in applying to an individual do not contemplate a situation where the individual taxpayer relieves himself of his bonds by transferring them tax-free to his spouse and thereby falls outside the ambit of the new sec. 19; see Recommendation E-8 of the Ben Shahar Committee.

45 Income Tax Regulations (Deduction of Car Expenses), 1975, K.T. no. 3377, p. 2402.

46 Income Tax Regulations (Deduction of Certain Expenses) (Amendment No. 3) 1975, K.T. no. 3377, p. 2406. These regulations follow along the lines of Recommendation B-2 of the Ben Shahar Committee. See Bigelman v. Assessing Officer (1972) 5 P.D.A. 75.

47 Income Tax Regulations (Deduction of Certain Expenses) 1972, K.T. no. 2865, p. 1337.

48 Secs. 20–39 of the Reform; Haroeh, Y., “Deductions or Credits” (1956) 7 Roeh Haheshbon 35.Google Scholar

49 Sec. 51 of the Reform. See Law for the Repeal of War Loans 1975, S.H. no. 774, p. 194.

50 See Ben Shahar Committee's Recommendations A-4 through A-10.

51 Sec. 50 of the Reform. See Recommendation A-15 of the Ben Shahar Committee, and especially Table A-10, which numerically demonstrates the difference between the pre-Reform and post-Reform methods. The main personal credits expressed in Israel Pounds per year are: (1) Credit to residents IL.2,400; (2) Credit to new immigrants IL.300 per month during first eighteen months in Israel, IL.200 per month during subsequent year, and IL.100 per month during subsequent year. (These credits substitute the deduction formerly, granted to new immigrants under sec. 9(16) of the Ordinance; See Joseph, A., “Incentives for Immigration” (1968) 3 Q. Tax J. 183Google Scholar; (3) Credit for wife; (4) Credit for wife with income from personal exertion IL.600 or IL.900 where family includes children. The allowances for children are set at IL.100 per month for each of the first two children, and at IL.125 per month for each additional child. These allowances will now be paid to both employees and self-employed. Other changes affecting the taxation of the individual include the introduction of a broader tax credit for medical expenses (see Recommendation A-13 of the Ben Shahar Committee; the increase of the amount of payments to the National Insurance allowed as a deduction (sec. 32 of the Reform); the increase of the credit for contributions to Provident Funds by employees (sec. 30 of the Reform) and the increase of the deduction of such amounts paid by self-employed taxpayers (sec. 31 of the Reform).

52 These are not adjusted automatically to reflect the entire increase of the index. For, the Minister of Finance has been empowered, with the approval of the Knesset Finance Committee, only partly to adjust these sums so as to reflect the increase of the index. Moreover, the exemptions, but not the tax ceilings, are adjusted only once a year.

53 Cf. Defence Loan Law (Approved Enterprises) (Amendment) 1975, S.H. no. 773, p. 165. See recently decided case Clal Binyan VeHandassa Ltd. v. Assessing Officer (1975) 7 P.D.A. 278.

54 See Witkon, A. and Neeman, Y., Tax Law (4th ed., 1969) 204–217Google Scholar; Lapidoth, A., Tax on the Income of Companies (Tel Aviv, 1971)Google Scholar; Yoran, A., “A Proposal to Change the Taxation of Companies” (1973) 28 HaPraklit 385Google Scholar; Assessing Officer v. Alliance Mifalei Zmigim Vegumi Ltd. (1974) 7 P.D.A. 7.

55 Secs. 55, 56 and 57 of the Reform. See Recommendation D-1 of the Ben Shahar Committee.

56 Sec. 54 of the Reform. See Ben Shahar Committee's Recommendation D-1.

57 Law for the Encouragement of Industry (Taxes) (Amendment No. 4), 1975, S.H. no. 773, p. 164. See “Mahir” Tassiot Matehet Ltd. v. Assessing Officer (1975) 7 P.D.A. 174; Mifalei Glilot Ltd. v. Assessing Officer (1974) 7 P.D.A. 85; Tahanot Kemach “Mifratz” Ltd. v. Assessing Officer (1975) 7 P.D.A. 197; Mifalei Kerur BeTsafon Ltd. v. Assessing Officer (1973) 6 P.D.A. 27; Agro Products v. Assessing Officer (1973) 6 P.D.A. 161; Neuderfer, M., “The Law for the Encouragement of Industry (Taxes), 1969” (1970) 20 Roeh Haheshbon 235.Google ScholarDuring 1975–6 reinvestment of profits will no longer be a sine qua non to the grant of the tax benefit, however, for former years compliance will still be required.

58 Law for the Encouragement of Capital Investments (Amendment No. 13), 1975, S.H. no. 773, p. 166. A Bill is now pending to allow a company to pay an additional 7 per cent of its taxable income as a company tax in lieu of the loan. See Defence Loan Law (Approved Enterprises) (Amendment No. 2), 1976, H.H. no. 1228, p. 167.

59 See Yoran, A., “Tax Incentives or Grants—Which is Preferable?” (1973) 24 Roeh Haheshbon, 6–9Google Scholar; M. Neuderfer, “Tax Incentives in Israel and Their U.S. Tax Aspect” and Yoran, A., “Incentives For Foreign Investment in Israel and Maximum Benefits to U.S. Investors” in Proceedings of the Conference on the Tax Consequences of American Investments in Israel (Bar-Ilan University, 1972) 81–102.Google Scholar

60 For a discussion of the Taxation of Capital Gains prior to the Reform, see Rafael, & Efrati, , “Israeli Taxation of Capital Gains” (1971) 27 HaPraklit 532 and (1972)Google Scholar 28 HaPraklit 88, 203; Klimovsky, E., “The ‘Asset’ as a Basis for a Capital Gain” (1966) 1 Q. Tax J. 140Google Scholar; Nahir, B., “A Practical Guide to Capital Gains” (1971) 6 Q. Tax J. 14.Google Scholar

61 Sec. 88 of the Ordinance.

62 See Rafael, A. & Efrati, D., “The Real Estate Right, The Association Right, and The Sale for Purposes of the Land Appreciation Tax Law” (1972) 2 Iyunei Mishpat 419Google Scholar; Lev, G., “The Capital Gain and the Land Appreciation Tax” (1972) 7 Q. Tax J. 213.Google Scholar

63 Sec. 40 of the Reform.

64 Sec. 42 of the Reform.

65 Sec. 41 of the Reform, replacing former sec. 90 of the Ordinance, which did not deal with this matter at all. The Reform follows Recommendation E-6 of the Ben Shahar Committee.

66 Sec. 42 of the Reform.

67 Sec. 91(d) states that the advance is due 30 days after the receipt of the capital gain. Query whether where the consideration is paid in instalments, is the advance not due until the payment of the last instalment?

68 Sec. 91(e) of the Ordinance as introduced by sec. 42 of the Reform.

69 Sec. 43 of the Reform.

70 See Recommendation E-3 of the Ben Shahar Committee.

71 Sec. 16 of the Reform amending sec. 28 of the Ordinance. Obviously, the taxpayer will normally wish to abstain from using the inflationary excess to wipe off losses in view of the low tax imposed to the inflationary excess. The language of the Statute is rather cumbersome in that this result is gathered from sec. 28(c), while secs. 28(a) and 28(b) seem to infer that capital gains are used to offset business losses incurred in the year subsequent to the occurrence of the business loss. The capital gain referred to in sec. 28(b), must be incurred within a business or trade.

72 See Recommendation E-7.

73 In the event of a loss on the sale of the shares, due to such a computation, it is set off against the gain on the loan.

74 Sec. 11 of the amending Law.

75 Sec. 48(a) of the amended Law.

76 Director of Land Appreciation Tax v. Feldman (1974) 7 P.D.A. 17.

77 See Yoran, A. and Flumin, E., Tax Planning in Business Lije (Tel Aviv, 1973) 231–240.Google ScholarRafael, A. and Efrati, D., “Tax Planning in Liquidating Companies” (1973) 28 HaPraklit 548Google Scholar, (1974) 29 HaPraklit 110, 240, and especially 256.

78 See sec. 59 of the Reform and sec. 61, which abolished sec. 134 of the Ordinance. 1'he latter empowered the Minister of Finance, with the approval of the Knesset Finance Committee to exempt certain taxpayers from the duty to file returns. Use of this power was made, see Income Tax Order (Exemption from Duty to File Return), 1970, K.T. no. 2535, p. 1218. See Recommendation G-1 of the Ben Shahar Committee.

79 In light of the recommendations of the Ben Shahar Committee (Chapter H), a 13th Schedule was added to the existing instructions of the Commissioner (published 1975, K.T. no. 3341, p. 1800 at p. 1803). This schedule requires that all taxpayers not included in the other 12 schedules and engaged in business, maintain proper books and records. These instructions will come into effect gradually during 1975–77.

80 Sec. 1 (4) of the Reform.

81 Sec. 65 of the Reform.

82 Sec. 58 of the Reform. Under Sec. 67 of the Reform, the taxpayer must be heard before a “best judgment assessment” is made. See Klimovsky, E., “The Taxpayer's Opportunity to Present his Case” (1960) 10 Roeh Haheshbon 99.Google Scholar

83 Sec. 63 of the Reform. The Advisory committee which assisted the Assessing Officer in reviewing taxpayers' requests for administrative review has been replaced by the new committee. See Recommendation H-5 of the Ben Shahar Committee; Ziv v. Assessing Officer (1974) 7 P.D.A. 202; Krainer v. Assessing Officer (1973) 6 P.D.A. 117; Blumenjeld v. Assessing Officer (1970) 4 P.D.A. 123; Berger v. Assessing Officer (1972) 5 P.D.A. 83; Wilkenfeld, , “Administrative Tax Tribunals” (1966) 1 Q. Tax J. 225.Google Scholar

84 Sec. 130(f) of the Ordinance as amended by sec. 58 of the Reform.

85 Sec. 66 of the Reform. It remains unclear as to whether or not in justifying his decision the Assessing Officer is the first to introduce evidence. A recommendation to such effect was made by the Ben Shahar Committee (H-5 and text on page H-8), but was not specifically introduced into the Reform.

86 Sec. 80 of the Reform. See Recommendation H-10 of the Ben Shahar Committee.

87 Sec. 76 of the Reform. The period during which interest and linkage differences are due will end two years after the close of the year for which tax is due, but shall begin de novo 15 days after the issuing of a final assessment.

88 See Beit Zacai Ltd. v. Assessing Officer (1964) (II) 18 P.D. 548; Segal v. Assessing Officer (1974) 7 P.D.A. 98; Shafrir v. Assessing Officer (1974) 7 P.D.A. 151; Ben Atar v. Assessing Officer (1969) 3 P.D.A. 56; Menahameni & Sons Ltd. v. Assessing Officer (1970) 3 P.D.A. 228; Shefer v. Assessing Officer (1970) 3 P.D.A. 85 on appeal (1970) 4 P.D.A. 1.

89 Zemach, Y. S., “The Taxpayer's Standing to Sue” (1973) 4 Mishpatim 611.Google Scholar A technical amendment to sec. 245 is proposed by sec. 8 of the Bill noted supra n. 22.

90 The Commissioner has publicly stated that a special department for advance ruling will be set up. See Lowenberg, “Tax Rulings” (1964) 14 Roeh Haheshbon 422Google Scholar; Sher, Z., “Codification of Israel Tax Law” (1966) 1 Q. Tax J. 129.Google Scholar

91 The first openly to attack the Reform were the air crews who apparently have come to an understanding for the gross up of their salaries. Next came the agricultural instructors who claimed their cars were used on behalf of their employers. They received an advance. The bank clerks went on strike, claiming that since their after-tax income remained the same as before the Reform, their employer was benefiting from the Reform (Elizur, Y., Ma'ariv 22.8.75, p. 17Google Scholar and Weinstein, A., Ma'ariv 22.8.75, p. 17Google Scholar). A special law was enacted to overcome the demands of these employees—see Collective Labour Agreements Law (Amendment) 1975, S.H. no. 779, p. 223. A special unofficial committee to watch the implementation of the Reform has been set up by the Labour Federation, the Employer's Coordinating Committee and the Treasury. Moreover, with the Reform came special measures in order to ensure employees that during 1975, their net after-tax salary would not be effected.