Minister of Finance Yair Lapid and Prime Minister Benjamin Netanyahu have reached a deal, under which Netanyahu will support Lapid's proposal for zero VAT for young couples buying their first homes, which he had previously opposed in principle, and Lapid will include target prices in his housing plan.
Lapid and Prime Minister's Office director general Harel Locker will today negotiate over including target prices in the housing plan that Lapid will submit to the housing cabinet in Monday. Sources inform ''Globes'' that Lapid has agreed to include target prices in his plan, but that he wants to submit it at a later meeting of the housing cabinet.
Lapid agreed to a non-binding declaration that the housing cabinet will discuss target prices at a later date.
The idea in target prices is that in land tenders, contractors will bid for lowest final sale price to homebuyers, not on the highest price of the land, under the normal practice in these tenders.
The target price plan, in contrast to Lapid's zero VAT proposal, has general support among Ministry of Finance officials, as well as Governor of the Bank of Israel Dr. Karnit Flug and the National Economic Council. A Netanyahu aide said, "In contrast to Lapid's proposal, the target price sets the maximum price for contractors, and is much more effective and efficient than setting zero VAT. Lapid's plan sets a minimum price and rolls the benefit onto the contractors."
"Globes" revealed on Friday that Locker supports raising the purchase tax on real estate investors who are buying a second or third property. This tax was already raised on investors in 2013. Lapid's aides say that this proposal is not included in his plan.
The sources added that Israel Tax Authority officials oppose raising the purchase tax on the grounds that it is "unfair". However, Lapid's right-hand man for housing, Uri Shani, supports the proposal, suggesting that if the next housing cabinet meeting does not approve it, the measure will be submitted to a subsequent meeting.
Published by Globes [online], Israel business news - www.globes-online.com - on March 23, 2014
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