In what promises to be a controversial decision, Judge Magen Altuvia of the Tel Aviv District Court has ruled that tens of millions of shekels given to Rabbi Baruch Abuhatzeira (known as the "Baba Baruch") and his son Rabbi Yehuda Abuhatzeira are considered taxable income.
The rabbis are members of a famous rabbinic dynasty; the Baba Baruch is the son of Rabbi Yisrael Abuhatzeira, the Baba Sali. They had appealed the assessments of the Tax Authority and denied claims that funds deposited into their bank accounts were equivalent to business revenue.
Rabbi Baruch appealed tax assessments from the years 2003-2011 and his son Rabbi Yehuda appealed assessments from the years 2005-2011.
According to the appellants, the funds that were deposited in their accounts during those years were personal gifts received at hilulas (festive memorial events) and were designated to be transferred afterward to various non-profit organizations. Other "income" was derived from the sale of religious articles that had belonged to the Baba Sali, or from voluntary contributions made by those who were seeking blessings or advice, as has been the custom in many haredi communities for hundreds of years.
According to the Tax Authority, deposits to the rabbis' accounts (which have allegedly accumulated to the sum of approximately 59 million shekels - around $18 million - over the years) are to be considered income from religious services provided by Rabbi Baruch and his son and are therefore liable for tax. The Authority also claims that the rabbis do not keep track of the payments that they receive. The assessments are allegedly based on the deposits made to the appellants' accounts, after the transfer of funds to non-profit organizations.
In its decision, the court stated that during his interrogation Rabbi Baruch confirmed that he accepts visitors several times a week, attends events, and arranges memorial services on certain dates (including once a year in Paris during which he raises hundreds of thousands of shekels for charitable purposes). The rabbi also stated that various individuals transfer funds to him and to non-profits, and added that he is assisted by a staff of assistants.
The court has now ruled that millions of shekels a year received by Rabbi Baruch are to be considered payment for services rendered and are taxable income.
"The sums raised, the frequency of the transfers, and the system which enabled the meetings with the rabbis demonstrate that this is a business or profession that derives from the rabbis' position and training, as well as the reputation of their family," the judge wrote in his decision.
In addition, since the appellants did not maintain accounts as required, the court imposed on the appellants the relevant fines prescribed by law (in relation to the years 2009-2011) and required them to pay court costs to the amount of NIS 300,000.