Israel's Finance Minister Moshe Kahlon has again gone back on the word he gave the public. Several weeks ago he told the media, the cabinet and the Knesset when tabling a “Bill to Amend the Land Taxation Act, Amendment No. 81, Temporary Order, 2015-5775” that the Purchase Tax Reform would come into force on July 1. Nevertheless, on June 22, he astonished us all by declaring that it would come into effect on June 24, midnight of the following day. Kahlon's behaviour caused disorder in the real estate market and was not for the best.
That was a move that should never have been carried out. First - because as a matter of fact, it did not serve the purposes for which the reform is being promoted - increasing the supply of apartments in the real estate market, and thereby lowering their prices. It was designed to serve two completely different aims. The first - increasing the government’s purchase tax revenues in the period of the 7 days preceding the abovementioned target date, July 1 2015. The second - a display of power, even arm bending, of every person whom the reform has branded as a “real estate investor,” as if to say - I am cleverer and more sophisticated than you - it is obvious to me that you intend to utilise the timeframe until July 1 to purchase investment apartments at the current rate of purchase tax and not the increased rate, and I will shuffle the deck on you.
Second - because he has severely harmed his credibility in the eyes of the public, and especially in the eyes of businesspeople and professionals in the real estate industry. Because, if he has done this once on one issue, he is of course liable to do so again on some other matter. For a person who was elected, inter alia, on the basis of wide spread appreciation of his personal credibility and public integrity, it is a shame that he should shatter it with one such miserable decision. A healthy market is a certain market. An uncertain market deters, and those who are deterred the most, are precisely those apartment owners who are not investors, those for whom a real estate transaction, with all its risks and complications, is something which in any event is already accompanied by many hesitations. All the more so, Kahlon should have refrained from harming the public’s estimation of his credibility and integrity, after it having suffered a significant blow following the elections, when he surprised everyone and recanted his explicit and important promise to handle the natural gas monopoly. Nothing would have happened had Kahlon from the outset refrained from stating a date for the reform to take effect. But, once he deemed it proper to officially announce, in advance, a clear and exact date, the abovementioned July 1, he should have not have brought that date forward, and certainly not - in the urgent manner in which it was done.
Third because in doing so, he caused very many transactions, the parties to which decided to press ahead and close, and sign on Monday and Tuesday up to midnight, to be conducted under pressure of time. Healthy negotiations are very difficult to conduct under pressure, and therefore many transactions were closed under terms that are far from optimal. In addition, thorough, responsible and professional work is very difficult to conduct in a rush, and for this reason - and in my opinion time will tell - it is very likely that unnecessary mistakes will surface in some of the conveyances executed in those 48 hours.
And the payment for mistakes in real estate transactions, both commercial and legal, can be very high indeed, as everyone knows. In this regard, in my professional opinion, these actions constitute a real violation of the Finance Minister’s responsibility to the citizenry, since his responsibility entails, inter alia, cautious conduct and refraining from instituting measures that could cause the public unnecessary damage. In this abovementioned move, he has caused the exact opposite, and as mentioned - without any proper justification.
The author Adv. Yossi Miller, is the founding partner of Miller & Co Law Office. The firm specialises in real estate law, accompanies construction projects of residential apartments as well as commercial and offices, and various real estate transactions.
Published by Globes [online], Israel business news - www.globes-online.com - on July 13, 2015
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