How to Avoid Tax Problems Thanks to New Rules
The Israel Tax Authority plans to use AI to check all tax returns, covering 100% of documents. Previously, only 1-4% of reports were checked. New algorithms will detect discrepancies in real time. This is linked to rising military spending. For citizens hiding income, the situation is getting tougher, but until August 31, 2026, a voluntary disclosure procedure is in effect, allowing legalization of funds and avoiding criminal prosecution.
The Israel Tax Authority is preparing for a major technological reform: it plans to check all tax returns using artificial intelligence. Previously, due to limited resources, the agency selectively analyzed only a small fraction of reports—in 2024, checks covered 1% of income tax returns, and recently the figure rose to 4%. New algorithms will cover 100% of documents, minimizing the chances of non-payers succeeding. AI systems can process vast amounts of financial information in minutes, cross-reference data from different databases, and identify suspicious discrepancies in real time. Tax lawyers Eli Doron and Shahar Noah highlight this, noting that routine processes that took months are now automated. The tightening of measures is linked to rising military spending and the need to replenish the budget with hidden income. For citizens accustomed to hiding income, the situation is becoming more complicated. However, the Tax Authority leaves an opportunity to legalize funds: since August 2025, the voluntary disclosure mechanism has been renewed, allowing individuals to report previously concealed income and, after paying tax, avoid criminal prosecution. The procedure is valid until August 31, 2026, and experts advise using it before mass checks begin.