Implementation of the Ministry of Construction and Housing's promise of cheaper apartments for young couples in Israel in the framework of a target plan is being delayed again. The reason this time is an unsolved tax dispute. Sources inform "Globes" that at an Israel Land Authority (ILA) management meeting today, it was decided to withdraw two of the lots in Rosh Ha'ayin from the target price plan.
In late 2014, the Ministry of Construction and Housing and ILA hurriedly published tenders for marketing land in Rosh Ha'ayin on the target price track, which was designed to guarantee young couples apartments at a prearranged fixed price constituting a 20% discount on the market prices. Only in the past few days, however, did ILA get around to considering the question of the tax that is due to be subtracted from the state treasury. Publication of the tender brochures in Rosh Ha'ayin is being delayed until the Israel Tax Authority publishes its position on the dispute.
The dispute centers around the question of whether or not part of the benefit granted under the plan is subject to VAT and property tax. A bigger question is why the Ministry of Construction and Housing and ILA waited and considered the matter only two months after the tender had already been published. The tax issue is delaying publication of the tender brochure, which is essential for submitting bids to buy the land.
Initially, carrying out the target price plan initiated by late Minister of Construction and Housing Uri Ariel was contingent on implementation of the 0% VAT plan initiated by former Minister of Finance Yair Lapid. After the 0% VAT plan failed, young couples were promised that that the target price plan was getting underway with the publication of the tenders, initially in Rosh Ha'ayin. Now, however, it turns out that the target plan itself faces obstacles and barriers as a result of the prolonged delay in the publication of the tender brochures.
A price target tender without the tender brochure is the same as not having any tender, because contractors and developers cannot evaluate the tender for the purpose of submitting bids to buy the land.
Tenders for construction of 2,792 housing units were published in December 2014 alone, including 1,695 discount housing units. Due to the delay in publishing the tender booklets, the tender has been postponed again and again, and is currently slated for completion in May 2015. Another tender for land in Modi'in involving the construction of 697 housing units, including 524 at a reduced price, has also been put off until this coming May.
The Ministry of Construction and Housing said, "The Tax Authority was asked to consider a single question about the price target tenders with respect to taxation in the deal. In discussions conducted with the Tax Authority, agreement in principle was reached by the Tax Authority and the Ministry of Construction and Housing that the apartments will not be taxed as a combination deal, and the Ministry of Construction and Housing is waiting for a written opinion before publishing the tender booklets."
The Tax Authority stated, "At the end of last week, ILA asked us for the Tax Authority's position on taxation of the land to be sold in the target price tender in Rosh Ha'ayin. The Tax Authority is considering the matter, and will give its answer in the coming days.
ILA confirmed that the two lots in Rosh Ha'ayin had been suspended for further consideration, but added that the tender booklet would be published soon.
Published by Globes [online], Israel business news - www.globes-online.com - on March 4, 2015
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