As part of the global combat against harmful practices in the area of taxation, Israel has been joining the OECD efforts in this area. Following the OECD Convention on Combating Bribery and the OECD Report on the implementation of this Convention by Israel (March 19, 2009), a specific Draft Law Amendment 170 to the Income TAX Ordinance (“ITO”) was published on June 1, 2009. This Amendment is a complementary step to the Criminal Code amendment of 2008 that prohibits bribing a public servant and a recent landmark court decision that prevents the deductibility of illegal payments to foreign public servants.

According to the 170 Bill it would be prohibited under the Oredinance to deduct bribery expenses – whether they are cash or in kind expenses.  The actual wording of Amendment 170 refers to “payments, whether performed in cash or in kind, where there is a reasonable basis to assume that providing these payments constitutes an offence according to any law ” (free translation – O.R.). It may certainly be assumed that the phrase “any law” includes other jurisdictions, due to the fact that the explanatory text of the Draft Law discuss the global effect of bribery payments and the general and worldwide efforts to face this harmful phenomenon. This Amendment, if accepted, may provided the ITA with very wide discretion in classifying certain expenses as illegal per-se.