Finance Ministry nixes proposal for taxing multiple home ownershp

Poll shows 60% of Israelis oppose increased defense spending at expense of welfare, 44% opposed to Lapid's 0 VAT plan.

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September 17, 2014 20:00
2 minute read.
House and calculator [Illustrative].

House and calculator [Illustrative].. (photo credit: INGIMAGE)

A proposal to tax owners of multiple homes, a tax on the rich that would ease the strain on the budget, is not feasible, the Finance Ministry said on Wednesday.

The new proposal had been put on the table to tackle several tough problems, media sources reported. For one, it would bring in NIS 2.5 billion in revenue without touching the middle class. For another, it would deter investment in real estate, and thus help to hold back ever-increasing housing prices.

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The cost of housing increased 6.8 percent in the past year, according to figures the Central Bureau of Statistics released on Wednesday.

Home prices have nearly doubled since 2007.

There are two variations of the proposal; one would charge owners a 2.5% tax on their third apartments, and another would impose a flat NIS 10,000 fee, according to Globes. It had the benefit of only affecting the rich; only about 48,000 people in Israel own three or more properties.

The Bank of Israel was still examining the proposal, which would lower the pressure in an increasingly tense budget battle. The 2015 state budget’s automatic growth is set to be above the spending ceiling set in law, so cuts are necessary before the Knesset passes the budget. While the Bank of Israel has warned against cutting civilian spending or raising the deficit too much, Finance Minister Yair Lapid has vowed not to raise taxes, and is insisting on passing his controversial “zero-VAT” housing policy.

Meanwhile, Defense Minister Moshe Ya’alon has been pushing for an NIS 11 billion increase for his ministry in the 2015 budget. The 17.5% defense spending increase is a major sticking point for Lapid, but Prime Minister Binyamin Netanyahu has publicly made the case for increasing defense spending.



A Calcalist poll released on Wednesday reported that 60% of Israelis oppose increasing the defense budget if it means cutting health, education and welfare budgets.

Similarly, 90% of the public wants the Defense Ministry to be more efficient in its spending, doing more with that it has.

If the public support for Lapid’s position is music to his ears, however, other portions of the poll will go over less favorably with him: The survey found that 44% of the population opposes the zero- VAT proposal, and think it should be dropped.

The plan has become a stumbling block in budgetary talks, even threatening the coalition’s viability. Lapid has staked his credibility on advancing the proposal, which would give young couples who served in the army a tax break when purchasing their first home.

Economists have warned, however, that the plan will be expensive and may cause overall prices to rise, pushing much of the benefit into the pockets of construction companies instead of young couples.

A NIS 3 billion price tag has been bandied about for the plan, though Lapid said this week that it would cost NIS 1.3 billion instead.

The Knesset Finance Committee has demanded testimony from Finance Ministry officials backing up the new figure.


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