Shraga Brosh, president of the Manufacturers Association of Israel, called on Deputy Interior Minister Ruhama Avraham to continue with a differentiated municipal tax rate policy following recent attempts by the Federation of Israeli Chambers of Commerce to harmonize tariffs across the sectors of the economy.
"Structured discrimination regarding municipal tax tariffs for the different sectors of the economy must not be altered. It makes perfect sense to discriminate between the industrial sector and the commercial and services sector," Brosh said in a plea to Avraham.
The income for each property unit in the commercial and services sector (offices and shops) was higher than for industrial factories, he added.
Brosh's demand comes as a response to the municipal tax reform raised in January by the FICC, which alleged that the average municipal tax rates for the commercial and services sector in 2005 have been 67 percent higher than for the industrial sector. The FICC called for a reform to an equal policy regarding municipal tax calculation for the economic sector as a whole.
"The current discrimination is wrong. It is at the root of the problem as to why the Israeli economy is not tapping its full growth potential," Uriel Lynn, president of the FICC said on Sunday. "The discrimination hurts small and medium-sized businesses and economic growth."
Lynn added that the growth rates for the different sectors showed that the commercial and services was the leading force in the growth rate for the country's economy over the past years.
"There is no economic backing to change the municipal tax rate policy. It seems that the complaint raised by the FICC is voiced by the banking sector and insurance companies, who pay the highest tax rates," Niv Kantor, Manager of the Economics Division of the MAI told The Jerusalem Post. "A reform to the current system would be detrimental to the industrial sector and the economy potentially leading to the closure of factories in Israel and the opening of factories abroad."
In 2005, the industrial sector paid over NIS 1.5b. of municipal taxes, mainly property tax.
"Local authorities fix municipal tax rates somewhere between given minimum and maximum rates for each sector. Every sector has different needs and thus needs to be treated individually. Factories occupy more ground and as a result they still pay more municipal taxes at the end of the day than the commercial services sector," Kantor said.