Are We Obligated to Pay Taxes?

Dr. Meir Tamari writes about issues of business ethics related to the Torah portion of the week.

In our parshah, Pharaoh levies taxes on the Israelites, both in money and labor. Throughout history the Jews have been subject to taxation, both by Jewish authorities and by non-Jewish ones, so the actions of Pharaoh are only one incident in a long experience, even if it was the first. There exists, therefore, an extensive literature in this area reflecting halakhic decisions and communal enactments by the autonomous Jewish communities that existed for almost 2000 years. Although there is really little din Torah for taxation, nevertheless, this literature and the communal practices clearly manifest the following Jewish pattern of taxation.

By and large, it is recognized that since the authorities, both Jewish and non-Jewish, have social obligations and are required to provide infrastructure, defense and other services decided upon by the authorities, they also have the right to tax the citizens in order to fund these obligations. The moral basis for this right to tax, flows from two sources:

Din HaMelekh- The Law of the king. Halakhically it was decided that everything that Samuel told the people when they asked for a king, the king has the right to do. There (1 Samuel, chapter 8:11-17) the text concerns itself primarily with taxation, either of goods, land and money, or of labor. Harav A.Y. Kook (Mishpat Cohen, section148) and Harav Ovadiah Yosef (Yachve Daat, part 5, section 63) have ruled that the parliamentary bodies in Israel inherit this right of the king. By virtue of the ruling of Shmuel (Sanhedrin 20a ), this was paralleled by the concept of dina demalkhuta dina so that non-Jewish kings had a similar right.

Hilkhot Shecheinim- The Law of Neighbors. The citizens of a town are considered to have the same rights as the common rights of neighbors. Thereby, they may force each other to pay for the public costs. (Baba Bathrah, chapter1, Mishnah 5; Rama , Choshen Mishpat, section176, subsection 25, Shulkhan Arukh)

Such taxes require the consent of the taxpayers, either through a consensus or a majority vote of the taxpayers or their representatives. The taxes could not be confiscatory, so that only wealth that yielded income could be taxed and the risk to the entrepreneurs involved was also a consideration of tax rates. For example, in Gaonic (Talmudic) times [circa 900 C.E.], gold and silver were exempt from taxation, because they were used primarily for decoration and jewelry. However, by the end of the Middle Ages they had partially become common commodities, and they were taxed partially, since they still retained a jewelry factor. When holding precious metals became an important method of tax evasion, they were considered just as an ordinary part of the taxpayer’s wealth (Trumat Hadeshen, section 342; also Rama Choshen Mishpat, section 163, subsection 3). Taxes were levied according to the area the income was earned and not according to domicile ( Teshuvot Harashba, part 5,section 178. The Rashba is a major source on the Jewish Fiscal system. ) Practiced today, this would prevent the decay of the city centers, where the wealthier live in suburbia and so do not fund the needs of the cities they earn their incomes in. There does not seem to be any place, halkhically, for double taxation, for example when two authorities wish to tax the same income. This would question the double taxation practiced in most countries today, whereby a corporation is taxed on its income before distribution and the recipient of the dividends is taxed as well. It should be noted that such double taxation is a major cause of tax evasion through profits distributed as expenses, salaries or personal perks.

Tax evasion is considered a crime either against other taxpayers or against the recipients of the public funds who suffered a loss of services or benefits. However, the moral affect on the tax evader must not be lost sight of and needs consistent and constant consideration. In order to evade taxes a person or corporation is required to file false financial reports involving all concerned in lies and falsehoods. Furthermore, the illegal gains require forms of consumption that need to be hidden from the authorities involving further lying as well as illegal capital transfers; as often as not such income is spent wastefully thereby raising further moral issues.

The major issue raised by the taxes of the Pharaoh in Egypt is the legitimacy of those taxes imposed by non-Jewish authorities. Shall we insist that the same moral yardstick apply, as to those levied by Jewish authorities? Unfortunately throughout Jewish history, such taxation was discriminatory and punitive, so naturally this question has acquired much prominence and heavily influenced people’s behavior.

The treatment of this issue may be divided into two primary halakhic attitude’s:

Both Maimonides and Yosef Karo have ruled that a non-Jewish authority, a king or a state, have the right to levy taxes and the Jewish citizens have an obligation to pay them. ( Mishneh Torah, Hilkhot G’zeilah,chapter 5, halakhot11-12; Tur Shulchan Arukh, Choshen Mishpat, section 369.) This is not only an application of the halakhic concept that the rule of the state is the rule, dina de malkuta dina, but also an acceptance that the budget operates for the welfare of the citizens. However, this requires legitimate rulers that exclude a usurper or one who rules against the will of his people. Taxes may not be discriminatory or imposed capriciously, and it must be clear that there is no evidence of robbery in the way the taxes are imposed or collected. Where these conditions are not met, there is no obligation to pay taxes, which are considered then as a form of robbery.

The collective taxes so often placed on Jewish communities in Europe during past centuries represent a special type of taxes. In addition to the general problem of discriminatory taxation, they introduced a threat of physical danger through expulsion, pogrom and even death, when the communal tax quota was unfilled. In this, the tax evader was actually a threat to the community and therefore could not avail himself of the ruling by Maimonides. It is interesting to point out that because of this we even have a ruling that a tax levied on the Jews in order to construct a church, had to be paid by each member, according to the allocation made by the community.

Rabbi Moses Feinstein ruled recently that one is obligated to pay one’s taxes in United States, that one is not allowed to file false information in order to obtain public funds for Torah education and that it is permissible for one to work for the I.R.S., even though this may mean transferring information about other Jews. The main thrust of the ruling is that United States of America is a benevolent country in which the Jews are free to practice their religion and does not persecute or discriminate against them. Obviously this stands in contrast to the behavior of governments in Europe over many hundreds of years.

In our day where there are no discriminatory taxes in the Western democracies, the question of the desecration of G-d’s name through tax evasion by Jews, must of necessity rule out such behavior. After all, the obligation to sanctify His Name and to refrain from Hillul Hashem, desecrating that Name are mitzvot obligatory on all, men and women alike. All too often, the community is negatively affected by the behavior of highly visible members of the community with regard to tax evasion or what is often a form thereof money laundering. So the name of the Jews, of Israel and of G-d is desecrated.

This column presents general principles for approaching business ethics topics. For specific guidelines, please refer to a halachic authority.

Dr. Meir Tamari is the former chief economist of the Office of the Governor at the Bank of Israel, and the founder of the Center for Business Ethics and Social Responsibility.