Prime Minister Benjamin Netanyahu is meeting with Governor of the Bank of Israel Prof. Stanley Fischer, Minister of Finance Yuval Steinitz, and Minister of Housing and Construction Ariel Atias to find solutions to the real estate crisis. The meet was scheduled urgently for 1 pm and called critical.
The most noteworthy of the solutions that the participants are due to agree to is the reduction of the historic betterment tax on land for a limited period, in order to encourage sales and purchases of some of the 1.9 million dunams (475,000 acres) of privately held land.
As "Globes" revealed a month ago, the proposal is aimed at releasing land on which developers can build homes, thereby cooling the housing market by lowering prices. Private market sources believe that 50,000-60,000 housing units can be built on privately owned land.
Landowners who bought land before 2001 pay a betterment tax rate of 49%, known as the "historic betterment tax". This tax rate is a clear disincentive to sell land, and in the current market climate, it is better for landowners to keep the land and bequeath it to their heirs.
The real estate tax reforms of 2001, in line with recommendations by the Rabinovitch Committee, established that that the betterment tax would be reduced to 25%, the tax rate on the sale of financial assets. However, most of the land was bought before 2001, and the high tax rate holds up land sales.
The Ministry of Finance plan would cut the betterment tax to 25%, regardless of the date of purchase. The cut will be for a limited time, with the goal of creating selling pressure.
The Ministry of Finance is also considering complementary steps: incentives for potential buyers (since incentives for sellers alone do not guarantee a deal) - such as lowering purchase tax on land (not apartments), which is currently at 5%. This cut, too, will be for a limited time. It will also be suggested to raise the purchase tax rate on expensive (luxury) apartments.
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2010
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