0 VAT faces new hurdles despite finance panel approval

Knesset speaker says he won't advance bill - which would give some young couples a tax break on their first home - for its final 2 readings in Knesset.

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November 12, 2014 19:58
2 minute read.
Yuli Edelstein

Yuli Edelstein. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

Finance Minister Yair Lapid’s zero-percent VA T bill encountered a new hurdle to passage on Wednesday even as the Knesset Finance Committee finally lent the policy its stamp of approval.

Knesset Speaker MK Yuli Edelstein (Likud) said he would not advance the bill, which would give some young couples a tax break on their first home, for its final two readings in the Knesset.

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Edelstein’s office said the speaker is “unwilling to sign checks he can’t pay” and that he cannot promise the bill will pass because there is no 2015 state budget since the Finance Ministry did not keep its promises about the Economic Arrangements Bill, which is passed at the same time as the budget each year and outlines the basic economic policies that are meant to accompany the budget. However, the Economic Arrangements Bill is usually very long and often features articles that have little to do with the budget.

Edelstein sought to split the Economic Arrangements Bill into several bills this year, so that some of the more complex issues it addresses can be discussed separately in Knesset committees, though he says Lapid has yet to agree to do so, though he did last year. The 2015 Economic Arrangements Bill is significantly shorter than in previous years, however.

Lapid’s Yesh Atid faction said Edelstein’s decision was “hard to believe” and vowed to push on with the policy.

“With his decision, the speaker will pour a bucket of water on the sparks of hope that flared this morning for young couples, when the discussions on the zero VA T ended at the Finance Committee,” a party statement said.

Until it finally approved the measure by a vote of 10-to-six on Wednesday, the finance committee had become a thorn in the side of Lapid and his signature housing policy. The opposition frustrated attempts to pass the law during the summer, causing Lapid to miss the September deadline he set for the law to go into effect, and once again threatened to derail it.

The opposition backed down when they realized an earlier version of the law could still pass, and agreed to compromise in several updates.

Likud MK Gila Gamliel offered a wording compromise that enabled divorced fathers to get the benefits, even if they have their kids only one weeknight a week and one weekend every other week. The organization Shared Parenting praised the change, saying it finally took into account the needs of children.

Another compromise opened the benefit to include the mentally disabled.

While Lapid is unlikely to allow his coalition partners to block his signature bill without a fight, many economists would be happy to see the bill struck down.

The Finance Ministry’s professional staff advised against the law; its chief economist resigned in protest; and the Bank of Israel has come out strongly against it.

Despite its best intentions, economists warned, the law was unlikely to actually help bring down the cost of housing, which has roughly doubled in the past seven years. Instead, it could push up prices, leaving even the few beneficiaries worse off and costing the state NIS 2 billion in the process.

Should it pass, the law would be in place for seven years.

Gil Hoffman contributed to this report.


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