It could have been 1984
A career in tax really does necessitate a command of numbers. You never know when they are going to unexpectedly turn up and try to bend your mind.
Many years ago, I was asked if I could assist an independent contractor with a spot of number bother with the Israeli tax authorities. I couldn’t.
An Israeli company contracted with a US individual for – what can best be described as – seasonal work. For a number of years, he had arrived on January 1st and left religiously on July 1st. In those days there were no low-cost airlines encouraging bookings decades in advance, so why was he so particular about the dates? To be back home in time for the July 4th jamboree? No. You guessed it. According to the Israel-US double taxation treaty, independent services by a US resident are only liable to tax in Israel if the individual is present for 183 days or more. As Israel has always contended that part of a day is to be considered as a day, he had to leave on July 1st – day 182. Since the paying company was required to apply for a withholding tax exemption certificate each year, the matter irritated the tax official charged with issuing the certificates to distraction.
There was nothing the frustrated official could do, so he waited patiently. And his patience paid off. Sometime towards the end of 1999 the individual booked his tickets as usual for January 1st to July 1st 2000. He may even have brilliantly thought he knew what he was doing, but – like over-clever crooks who are eventually hoisted with their own petard – he screwed it up. Even though it divides by 4, the turn of a century does not normally sport February 29th UNLESS the number of turns of the century since that event in Bethlehem two millennia ago also divides by 4. 2000 was a leap year, July 1st was day 183, and he was sunk.
This story came to mind now, because January is the month for getting caught napping by the Israeli tax system.
Individuals with taxable income from a rental apartment can pay 10% tax on the gross income, rather than much higher marginal rates on the net, until 30 days after year end. That adds up to January 30th. According to the rhyme I learnt as a child, that is not the day January hangs up its boots – so paying on the last day of the month, although intuitively the thing to do, is too late. A miss is as good as a mile (although many experts might disagree in this particular case).
Companies that are eligible to maintain their books according to the Dollar Regulations, effectively reporting in foreign currency, are required to elect to do so by that same, busy, day – January 30th. Remember on January 31st – and you will be twisting through the year with the shekel.
Does somebody get their kicks out of tripping innocent taxpayers up with this sort of insidious nitpicking? Or, do the authorities just have a difficult time with numbers?