A taxing issue

Jerusalem's businesses threaten to take action against City Hall over what they claim is the cancellation of a longstanding "arnona" agreement.

There are some fighting words emanating from the leaders of Jerusalem's major business organizations toward the municipality. Their fury is aimed at a municipal proposal to change the way the city collects arnona (municipal tax) from Jerusalem's businesses. Not only has the municipality's plan caused considerable consternation among the leading economic organizations, but the way in which the city has handled the proposed changeover has created significant ill will among these organizations, which already believe the municipality is insensitive to their needs. Business leaders claim they were never consulted or warned about the potential changes. Under the current arrangement, Israel's Trade and Manufacturers Association along with three other representative business organizations, including the Jerusalem Chamber of Commerce, collect arnona from their members and pay the municipality in one centralized sum, essentially acting as the middleman between Jerusalem's businesses and the municipality. The municipality now wants to revamp the process and require businesses to deal directly with the city themselves. A spokesman from Israel's Trade and Manufacturers Association said the municipality informed them of the changes without any prior consultation in a letter sent to the association in early March. The municipality refused to respond directly to the allegations and instead issued a statement declaring that it has "no intention of canceling the centralized collection arrangement for the economic organizations in Jerusalem" and is only "offering a new arrangement intended to correct distortions and prevent discriminations that were created over the years from a legal and economic standpoint." City Hall declined to elaborate on what the distortions and discriminations entailed. Representatives from the leading economic organizations, however, called the municipality's statement an argument over linguistics. In addition to informing them that the municipality now wants Jerusalem's businesses to pay the arnona directly to the municipality, they said, City Hall has also proposed a number of changes that will make it impossible for the representative organizations to continue to act as middlemen and continue with the centralized collection. According to the Jerusalem Chamber of Commerce director-general Uri Halfon, the organizations representing Jerusalem's businesses currently pay a collective sum estimated at NIS 1 million a month in arnona to the municipality. For providing this service, the municipality pays these organizations a monthly fee of approximately NIS 6,000. The municipality wants to end this practice and instead offer an NIS 12 fee for each individual arnona payment collected by the central economic organizations, claiming that the money saved will be invested directly in the development of commercial and industrial zones to benefit business owners. Halfon said the new fee system would make it economically unfeasible for the organizations to continue the centralized collection arrangement and called the proposition a "mockery of the investment of time and effort that we have put in." He argued that the city's real purpose is to weaken the power of the economic organizations by forcing businesses to deal directly with the municipality. "This is not about the money - it is coming from a desire by the municipality to weaken us," said Ran Tuttnauer, head of the Israel Trade and Manufacturers Association and chairman of the Jerusalem area Industrial Association. Noting that the city will only accept credit card payments rather than checks from businesses directly, Halfon pointed out that the city will spend just as much - if not more - on credit card fees. In addition, the municipality wants to shorten the grace period allocated to business owners on payments from 18 days to 10, thus making it more difficult for business owners to find and correct billing mistakes before their credit card is charged. The current method of arnona payment, however, has been in place for as long as anyone can recall and business leaders say there are good reasons for it. Chief among them is the ability to streamline the process and shield businesses owners from what they describe as a "bureaucratic nightmare" in dealing directly with the municipality. According to Tuttnauer, this is no small service provided to business owners as it saves them a tremendous amount of time in ensuring the validity of each bill and correcting the mistakes. "The municipality sends our organization the bill and we have people that check it and make sure there is no mistake. If there is, we send people to negotiate it," he affirmed. The efficacy of this service is echoed by many business owners. Alon Harpaz, general manager of Talpiot toy store Play House, pays NIS 40,000 a month in arnona to maintain his store, which holds over 14,000 different toys imported from the Far East. As a member of the Jerusalem Chamber of Commerce, he greatly prefers paying his bill through the organization. "You get there [the municipality] and you lose half your day, you lose your time, you lose your money and you lose your head with the people sitting there," he said, describing one of his typical encounters. In addition, business leaders claim that the municipality does regularly make enough billing mistakes that dealing with them would significantly detract from their resources. Before relying on the Manufacturers Association to help consolidate the billing and payment process, Pino Tsruya, financial controller of NDS, a Har Hotzvim-based hi-tech company with more than 1,000 employees, hired a private company to audit its NIS 130,000 per month arnona fees. "We used a private company to check our bills and we found a lot of mistakes which we paid the company good money to correct," he said. "Good money" equaled one-third of the credit returned from the city, which amounted to far more than the NIS 100,000 yearly membership fee NDS pays to the Trade and Manufacturers Association. For Jerusalem's business umbrella organizations, this move by the city demonstrates a growing list of perceived insensitivities toward businesses in the city. They allege that even though all four of the major business organizations oppose the move, they have not yet been able to obtain a meeting with the municipality to discuss a compromise, and instead have been reduced to communicating with the municipality through a flurry of letters. "This is a trend of the municipality to debilitate the power of the organizations in Jerusalem," Halfon asserted. "The arnona is one of the tools to cut the oxygen pipe which this organization has." The economic organizations have decided to strike back and have announced that they intend to boycott the Jerusalem Economic Convention taking place this June which is typically attended by the prime minister, the finance minister and the mayor of Jerusalem. "I don't think they [the representative organizations] are too strong," Tsruya said. "I believe that the Jerusalem Municipality wants to deal with every company separately because it's not convenient for them to have someone knowledgeable about our rights."