On September 19, 2017, the Tax Justice Network Israel held a roundtable discussion on “Hybrid Mismatches in Israel “ in cooperation with FES Israel and the College of Management in Rishon leZion.
The term “hybrid mismatches” refers to discrepancies in the tax laws of two or more independent tax jurisdictions or territories in relation to the classification of a legal entity or financial instruments for tax purposes. The hybrid component refers, for example, to the classification of a legal entity as a partnership in one country and as a company in another country or the classification of a financial instrument such as Profit Participation Loans as a capital investment in one country and a debt in another country. A tax planning which involves the use of hybrid mismatches takes advantage of the tax discrepancies between jurisdictions in order to reduce the tax rate, which then erodes the tax base of at least one of the two countries.
After the Tax Justice Network had presented its report, the experts discussed its findings and proposals. All participants agreed on the necessity of stronger international cooperation in order to diminish the phenomena of tax evasion, primarily by global enterprises. Among the experts were representatives of the Israel Tax Authority, the Business and Industrial Advisory Committee at the OECD, tax consultant offices and academic institutions.