Rabinovich Tries to Defuse Controversy over Tax Payment

Israel’s ambassador-designate to the United States, Itamar Rabinovich, is trying to defuse controversy surrounding revelations that he recently paid an indemnity to tax authorities for money earned in the United States several years ago.

Rabinovich, a prominent academic and currently Israel’s chief negotiator with Syria, issued a public statement over the weekend through his tax lawyer emphasizing that he made the payment as a goodwill gesture, and was probably not even required to do so.

Reports of the indemnity surfaced in the Israeli press last week and were immediately seized upon by opposition members of the Knesset, who will most likely raise the issue in the plenary this week.

Rabinovich is negotiating with Syria on the basis of a willingness by the Rabin government to withdraw from parts of the Golan Heights in exchange for peace with Syria, a policy that has evoked ire among the ranks of the right wing.

In the statement, tax attorney Pinchas Rubin of Tel Aviv explained that two years ago Rabinovich closed a bank account he had held in the United States during a year’s sabbatical that he spent there.

Rabinovich had transferred back to Israel the balance of $26,000 left in the account.

Subsequently, in the wake of anonymous letters about him after he was appointed chief negotiator with Syria, Rabinovich approached the tax authorities, and reached a settlement with them in which he paid an indemnity of 39,400 shekels ($14,460).

It was not clear from the attorney’s statement what this sum of the indemnity related to, what the source of the tax obligation was, and how much tax Rabinovich paid in addition to the indemnity.

Rubin said he had advised Rabinovich that the question of whether he owed tax was moot under Israeli law, given that the income in question had originated abroad.

He said that were it not for Rabinovich’s public appointment, he would have advised his client to ignore the anonymous letters.

Moreover, the attorney said, had Rabinovich sought Treasury approval to keep his account abroad, it would almost definitely have been granted.

“For this reason, too, I advised Rabinovich that he had no need to deal harshly with himself. Rabinovich heard my advice; but he did not take it,” Rubin said.

Rabinovich instead instructed the attorney to negotiate a settlement with the tax authorities.

“I wish to point out, too, that the process of indemnity payment is anchored in statute law and is commonly applied in Israel and in other countries,” Rubin wrote in the statement. “The application in this case was in no way exceptional.”

Treasury officials questioned by the newspaper Ha’aretz disagreed on interpretation of the tax law, and maintained that the income was taxable.

But they tended to agree that Rabinovich could have kept the account abroad, had he applied for a permit to do so.

Foreign Minister Shimon Peres publicly backed Rabinovich over the weekend, telling army radio the professor had “committed no crime.”

Media commentators, including the editorial writer in Ha’aretz on Friday, called on the ambassador-designate to publish the full story and remove the cloud of uncertainty and suspicion that had descended on him as a result of the original press reports.

The statement by the attorney was an attempt to comply with the calls for disclosure, and to head off suspicion that the professor’s deal with the authorities was secured thanks to intervention by the prime minister’s office.’