Israel tax authority demanding $1 billion in unpaid taxes from Beny Steinmetz

The Israel Tax Authority is demanding US$1.07 billion (four billion shekels) in unpaid taxes from billionaire diamond businessman Beny Steinmetz, says a media report.

Tax officials confirmed the information, which will appear in a report to be broadcast tonight on Israel's Channel 10 TV channel on Tuesday night, says the report in the Ha'aretz daily.

The inquiry into Steinmetz was started after tax officials found inconsistencies between papers Steinmetz filed in 1997 and further information provided seven years ago about his group of businesses.

The State Prosecutor's Office and the tax authority in 2009 looked into opening a criminal investigation against Steinmetz on charges of tax evasion, the Channel 10 report will say. Steinmetz has appealed against the authorities' tax assessment and the matter is now in court.

An Israeli report in March said that Steinmetz had moved his official residence for tax purposes to Geneva, a move that would give him foreign resident status. Steinmetz's spokesman told TheMarker that he had been living in Switzerland for a number of years.

However, Israeli business sources said Steinmetz only made the move at the end of 2011, and until then he had lived in Israel, Ha'aretz reports.

Steinmetz has many companies operating all over the world that are held by two trusts registered in Lichtenstein.

In 2005, Israel's parliament approved a change in the law which enabled trusts established by non-Israelis to be tax exempt in Israel. Steinmetz's lawyers told the tax authority soon after the change that the trusts holding Steinmetz's firms were created by a Belgian citizen, and therefore tax exempt, the paper said.

But the tax authority was suspicious as earlier information from Steinmetz showed him as the owner of a large number of the companies.

Steinmetz's spokesman says in the Channel 10 report that Steinmetz has paid all taxes required by law and the tax assessment dispute is being adjudicated according to legal and tax authority regulations.

Regarding the foreign companies that Channel 10 mentions, they do not operate in Israel, are not owned by Israelis, and do not own any Israeli taxes, says the spokesman.

News agency Bloomberg in November named Steinmetz as the wealthiest person in Israel with a net worth of US$8.1 billion, and ranked him 137th richest man in the world in its first Bloomberg Billionaires Index of the world's 200 wealthiest people.

Bloomberg said that Steinmetz's fortune rose by almost three percent, or US$220 million, in the first 10 months of this year.