The initiative to apply 0% VAT for first-time homebuyers will be a temporary ordinance for seven years. After a protracted battle between Knesset Finance Committee chairman Nissan Slomiansky and Minister of Finance Yair Lapid over sections of the bill to introduce a zero VAT rate for first-time homebuyers, which prevented its passage, the two managed to reach agreement yesterday.
Even so, it is not clear whether the bill will be put to the vote before the Knesset goes into summer recess tomorrow, given the huge number of proposed amendments, amounting to over 1,000. The bill will come before the Finance Committee for approval today, but it is doubtful whether it will be approved in the Knesset plenum before October.
In the understandings reached between Lapid and Slomiansky it was decided that as well as the 0% VAT rate becoming a seven-year temporary ordinance, Minister of Housing and Construction Uri Ariel's bill to introduce a target price for contractors bidding in land tenders, Lapid's signature on which was made conditional on passage of the 0% VAT bill, will also become a seven-year ordinance.
Slomiansky insisted on the time limit for the 0% VAT provision on the assumption that within seven years the state of the real estate market will improve, rendering the provision otiose.
"This law costs the state NIS 3 billion a year. According to all the plans of the Minister Finance and the Minister of Housing, in four years' time prices on the real estate market will fall and will become reasonable, and so there is no reason to invest so much money every year," Slomiansky said.
Published by Globes [online], Israel business news - www.globes-online.com - on July 29, 2014
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