The Ministries of Finance, the Interior, and Construction and Housing have been working in recent months on a plan for a change in municipal property tax. Complete cancelation of the tax is also under consideration. The ministries plan to submit the proposal to the new government when it is formed.
The staff work was conducted because of property tax distortions. Many local authorities are unable to collect the tax from all residents, resulting in a situation in which many people do not pay the tax, and receive services from the local authorities at the expense of those who do pay.
In addition, there are more than a few people who pay taxes out of proportion to the services they receive. For example, an older couple with grown children who have already left home still pays the same property tax, even though they need fewer services.
The proposal also follows property tax protests by many residents of new neighborhoods constructed in the past decade in various cities.
The government ministries are considering two changes in the municipal property tax:
1. Complete abolition of the property tax and its replacement by a government tax - the Ministry of Finance wishes to raise VAT, possibly by as much as 2.5%, so that the state will collect the tax from all citizens, instead of the local authorities collecting it from only some residents.
2. Changes in the property tax to give greater weight to the taxpayers' income - for example, a family with many children, which must live in a larger apartment, will pay a reduced tax, and municipal tax discounts will be provided to low income residents.
Published by Globes [online], Israel business news - www.globes-online.com - on March 24, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015