The Ministry of Finance is continuing to plan its campaign against the real estate bubble. Sources inform ''Globes'' that the ministry is considering reducing the historic betterment tax and purchase tax on land for a limited period, in order to encourage sales and purchases in some of the 1.9 million dunam (475,000 acres) of privately owned land.
The proposal aims to release land on which developers can build homes, thereby cooling the overheated housing market by lowering home prices. An estimated 50,000 to 60,000 housing units can be built on privately owned land, a substantial part of which is the large bloc in north Tel Aviv.
Landowners who bought land before 2001 must pay a 49% betterment tax, which has created a clear disincentive to sell the land. In the present market climate, it is better to hold onto the undeveloped land and bequeath it to heirs.
The 2001 reform in land taxes, based on the Rabinovitch committee recommendations, stated that the betterment tax would be reduced to 25%, the level for the sale of financial assets. Nonetheless, most land was bought before 2001, and the high tax rate holds up land sales. The Ministry of Finance plan would cut the betterment tax to 25%, regardless of the date of purchase. The cut be for a limited time, resulting expected pressure to sell.
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2010
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