Attorney General will not 'veto' bill canceling VAT for first-time home buyers

The bill had faced legal challenges for making the benefits more easily obtainable for those who had served in the army or national service.

July 16, 2014 17:42
2 minute read.
Attorney-General Yehuda Weinstein [file].

Attorney-General Yehuda Weinstein 370. (photo credit: REUTERS/Ronen Zvulun )


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The attorney-general will not “veto” Finance Minister Yair Lapid’s bill to cancel the 18-percent VAT for some first-time home-buyers, Deputy Attorney-General Avi Licht told the Knesset Finance Committee on Wednesday.

“Opponents of the law often confuse professional considerations about the effectiveness of the law with legal, constitutional considerations,” Licht told the committee, saying that broad condemnation from economists and ministry professionals were not enough to force the bill’s retraction.

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The bill – which the government’s top economic adviser, Bank of Israel Gov.

Karnit Flug, opposes – is aimed at easing the high cost of housing for young, middle-class couples. Economists, however, have argued that it will not affect the price of housing, which has nearly doubled in the past seven years, and may even push it up by creating greater demand. Contractors and construction companies would gobble up a considerable portion of the benefit, they argue, while costing the government significant funds.

Former Finance Ministry chief economist Michael Sarel, who resigned in protest over the bill when it was proposed in March, estimated that it could eventually cost the country NIS 50 billion.

The bill had faced legal challenges for making the benefits more easily obtainable for those who had served in the army or national service, effectively barring Arabs and most ultra-Orthodox from participating.

While veterans will be able to apply the benefit to apartments costing up to NIS 1.6 million, the rest will only be able to use it for homes up to NIS 950,000.

Attorney-General Yehuda Weinstein had said an earlier version of the bill, which put the maximum price for non-servers even lower, would not pass muster at the Supreme Court. Licht said the current threshold of NIS 950,000 covered 60% of apartments in haredi areas.

Still, a broad swath of the committee from across the political spectrum raised objections to the bill.

“It’s difficult to give legal priority for products in short supply to those who have served,” said Likud MK Carmel Shama-Cohen. “The housing crisis touches everyone, just like life-saving medicine, food products, etc.”

Bayit Yehudi MK Zvulun Kalfa said the plan did not help people in the periphery because it did not boost the level of construction there, while Hatnua MK Eliezer Stern argued that the law would be more efficient if it gave grants or partial reimbursements to those who served, since that would help them claim a greater portion of the benefit than the VAT scheme would.

Last week, the Knesset’s legal adviser said the law, which has already passed its first reading, would need to be significantly amended in the Finance Committee if it were to stand a chance against a challenge in the Supreme Court.

Meanwhile, Interior Committee chairwoman Miri Regev (Likud) said she had persuaded the Finance Ministry to allocate an additional NIS 1.5b. for public housing as part of an affordable- housing bill.

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