MoneyIsrael news photo: Flash 90

The Tax Authority is set to recommend a change in Israeli business law that would prohibit merchants and suppliers from accepting payment in cash in amounts over NIS 10,000 (about $2,700). Currently, suppliers are allowed to accept cash payments of up to NIS 20,000, a report Wednesday said. The report was confirmed by an official in the Authority.

The change is part of the Authority's ongoing battle against “under the table” money, in which buyers and sellers use funds that were never reported – or taxed – to make purchases. On the buyer's side, the Authority is interested in finding out the source of income, and whether or not income or other relevant taxes were paid. On the seller's side, the Authority wants to be sure that Value Added Tax, and other relevant taxes, are collected. Instead of cash, customers will have to make their purchases using credit cards or checks.

The Authority is also considering increasing the severity of tax offenses. For example, the Authority is said to be preparing legislation that will give it blanket permission to examine the bank accounts of individuals suspected of tax fraud. Currently, the Authority must get a court's permission to do so, and must make a clear case of the likelihood of fraud, as opposed to just “suspecting” an individual. In addition, the Authority is seeking to increase its power of seizing property, such as vehicles, from individuals that owe it money – allowing, for example, police to seize a vehicle on the spot at a roadblock when they stop a driver for whom a seizure order has been issued.

In figures released Wednesday, Authority officials said that as much as 20% of Israel's GDP – around NIS 180 billion – is conducted “off the books.” A total of NIS 221 million is expected to be collected in 2012, officials said.