Q. I live in Israel (the relevance to the question of which will soon become apparent).
Two years ago, like every year, we paid our Israeli income tax. Unfortunately, not all our charity receipts were received from the institutions in time, and therefore, we had to fill out a special late tax return to qualify for a tax refund for those donations. Since the refund concerned taxes we paid two years prior, they sent us a refund, plus interest, on the tax money they received from us that, because of the donations, we did not have to pay.

1. Since this is a Jewish government, upon receipt of the interest, did we transgress a Mosaic or Rabbinical injunction? If yes, what rectification is necessary to atone for this transgression?

2. If no, and we may keep the “interest”, do monetary tithes need to be paid on this sum, like any other monetary gain?

A. On question 390 and 488 in this forum we wrote: “Maharshag (Y.D. 50) and Igrois Moishe (Y.D. 2:63) permit lending with interest when dealing with a Jewish owned corporation, since the owners do not carry personal liability and any liens are limited to the corporate assets. Lending to the government of Israel would be similar.

Many Poiskim disagree with the above ruling and consider in reality a corporation not more than a partnership that is obligated to lend without ribbis. (See; Minchas Shlomo 1:25, Minchas Yitzchok 3:1, Ohr Mitzion Y.D. 5, et. al.) However Har Zvi (Y.D. 126) suggests that a Jewish government, since it has no identifiable or defined owners, is indeed different and is similar to Hekdesh.”

Many other Poskim provide similar permissions (Horav I.A. Liebes in Bais Avi 117, Bris Yehudo 7: 68, V’chai Achicha Imcha p. 35, Sefer Hashabit 4: 49 et. al.). Horav Shlomo Miller Shlit”a pointed to a similar ruling of the Chavas Daas (Y.D. 168-169: 17: Biurim 33) on regards to the borrowing done by the leaders of a congregation, where there is no borrower or lender.

Horav Shlomo Miller’s Shlit’a opinion is that indeed in your particular question, the fact that it is not a case of “ribbis ketzutzo” or a preset interest and it also deals with government payments, that would provide a plausible heter. In practice, that seems to be the common custom today.

He also advised to treat this as any other income in regards to giving maasser.

Rabbi A. Bartfeld as revised by Horav Shlomo Miller Shlit”a