Lapid raises housing VAT benefit threshold for non-IDF vets

Finance minister reduces limitations for people who have not served in the Israel Defense Forces or National Service.

Yair Lapid  (photo credit: Reuters)
Yair Lapid
(photo credit: Reuters)
Finance Minister Yair Lapid on Wednesday gave some ground on a law given government benefit to first-time home-buyers, reducing limitations for people who have not served in the IDF or National Service.
In its original incarnation, the controversial law would exempt young couples buying their first homes from the 18-percent value-added tax excluded the nonparticipants altogether.
Critics blasted the policy as discriminatory against ultra-Orthodox Jews and Arabs, who seldom serve in military or national services.
It seemed likely to be struck down by the Supreme Court.
A later proposal opened it up to them on a limited basis, providing the apartments for nonparticipants cost less than NIS 600,000 as opposed to the NIS 1.6 million maximum applied to everyone else.
Anti-discrimination groups said that hardly any apartments were available in that price range, making the concession a nonstarter.
The latest proposal, distributed on Wednesday to the cabinet for a vote on Sunday, raised the maximum for nonparticipants to NIS 950,000.
Knesset Finance Committee Chairman Nissan Slomiansky, an MK from Bayit Yehudi who had requested the minimum price be raised for nonparticipants, praised the “substantial” changes and retracted threats to block it in the committee.
The latest changes passed muster with Attorney-General Yehuda Weinstein, who had found the NIS 600,000 limit untenable.
The tax benefits are still only to be applicable to couples with at least one child or single people over 35 who haven’t previously purchased an apartment.
The policy, which aims to bring down soaring housing costs, was not only critiqued by anti-discrimination groups, but by economists as well.
When the policy was first announced in March, Bank of Israel Governor Karnit Flug said that it doesn’t get at the real problem in the housing market – a supply shortage of new housing units and an increasing demand.
Michael Sarel, the Finance Ministry’s chief economist, resigned in protest, saying that narrow, temporary tax-exemptions had a tendency to expand and become permanent over time due to political pressure.
Indeed, in the two months since the policy’s announcement, where the Knesset Finance Committee estimated the cost at NIS 2 billion, the estimation has grown to NIS 3.5b.