Opposition delays 0-VAT discussion

Economists have also scoffed at the bill, saying it will not actually help lower the high cost of living.

November 12, 2014 04:21
2 minute read.

Wide view of the Knesset. (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)

The opposition on Tuesday delayed Knesset Finance Committee discussions on Finance Minister Yair Lapid’s zero-VAT housing policy, though meetings were set to continue as planned later in the week.

Knesset Finance Committee chairman Nissan Slomiansky (Bayit Yehudi) angrily halted the discussion after Shas MK Yitzhak Cohen used a parliamentary trick of raising a “new topic” claim, which suggests that the bill has changed materially from its first reading in the Knesset. The claim requires Slomiansky to get approval from the Knesset House Committee that the bill did not need to be sent back to the Knesset for another first reading, thus delaying it.

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“The opposition’s declaration of a new topic on all the new sections requires me to pull all these sections, which actually improved and expanded the number of beneficiaries of the zero- VAT benefit for a first apartment, and it’s a shame,” Slomiansky said before halting the discussion.

The provisions included sections offering the benefit to the disabled, and changing a requirement that the beneficiaries be parents under the age of 35.

The opposition also delayed the bill’s progress through the committee during the Knesset’s summer session, frustrating attempts to put it into effect by September.

Ultra-Orthodox and Arab parties aren’t satisfied with the bill, which excludes their constituents by limiting the benefit to those who have served in the army and national service. The bill may face a Supreme Court challenge if it proceeds.

Economists have also scoffed at the bill, saying it will not actually help lower the high cost of living. Instead of increasing the number of available housing units, which are in short supply, the bill simply fuels demand.

Former Treasury chief economist Michael Sarel, who quit in protest of the bill in March, reiterated his objections on Tuesday.

“The zero-VAT law will perpetuate the situation in which real estate investment is the best investment vehicle, which will raise the prices,” Sarel said at corporate finance conference. “Hundreds of thousands of people will descend upon thousands of apartments, and the result will be that the contractors will raise the prices openly and legally.”

Industry sources agreed.

Erez Cohen, a former chairman of the Institute of Real Estate Appraisers, called the bill a mistake that would “break the camel’s back.”

“Today there are 3 million Israelis that do not own an apartment, in comparison with 1.5 million in 1999,” he said.

The amount of Israelis that do not own homes grew from a quarter to a third in that time period because of population growth and inadequate numbers of new apartments being built, he said.

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