The Israelis' burden of arnona (local property tax) affects the Ministry of Defense too. In 2012, the ministry paid NIS 600 million arnona to local authorities on 113 army bases. 80% of the payments are to just 30 local and regional authorities, including regional authorities with only a few thousand residents.
The Ministry of Defense says arnona payments have soared from NIS 100 million in 1998 to NIS 300 million in 2005 and NIS 600 million in 2012, a 500% increase over 15 years.
"We are Israel's biggest arnona cash cow, paying far more than any other entity," a top Ministry of Defense official told "Globes". In 2012, we paid NIS 600 million in arnona, and for what? For IDF bases, most of which are outside cities. They are big and complex, with multiple uses, including residences, offices, storerooms, and special uses."
The source said that the source of the problem was that arnona directives by local authorities have no definition of the tax rate for defense use. "113 local authorities charge the Ministry of Defense arnona according to different and varied definitions, as each one sees fit," he said. "No one thinks that there should be a fair response within arnona directives, and as a consequence an awful market has developed, which has increased the arnona cash cow from NIS 100 million to NIS 600 million. Most of land used by military bases is open land, which receive no services from local authorities, such as street light repair, which other businesses receive. In some places there isn't even garbage removal because of restrictions on entering the bases."
The official added, "For example, at Air Force bases, local authorities charge us arnona on the paved areas and runways. Some local authorities charge arnona for underground hangars for combat jets at the rate for fee-paying parking garages. This continues even when we're talking about ramps for tanks and outposts along the border. We cannot allow surveyors to enter every base, and the municipalities charge us on the basis of assessments that are inflated by millions of shekels. The whole issue of arnona damages military secrecy. The municipalities want to measure everything, and tomorrow a survey with a security clearance will deliver the data to a municipal clerk who has no clearance, and the day after, the information will reach the enemy.
"IDF bases should be exempted from this issue of exorbitant tax collections. IDF bases are not banks or insurance companies. They are open spaces, and our planning and building laws should be different for reasons of national security. Municipalities take us to court and pay lawyers on the basis of insane percentages, so that every local authority makes its lawyers rich. The reality is a wild market that has gotten all out of proportion. Where will be in 2015? Arnona of NIS 1 billion?"
The Ministry of Defense says, "The defense establishment pays arnona in accordance with the law and local authorities' tax directives. However, continuing the payments under the current format creates distortions, and the charging of rates that do not fit the uses at IDF bases, has caused a sharp increase in payments. The defense establishment is carrying out staff work to put into order the arnona on IDF bases.
"The distortions in arnona payments include payments of tens of millions of shekels a year to regional councils with only a few thousand residents, payment of especially high rates to local authorities in central Israel in view of the fact that they are still classified in 2013 as immigrant towns, the payment of arnona for tank ramps on the Golan Heights, demands for arnona payments for operational outposts along the borders with Lebanon and Syria, and so forth."
Adv. Uri Deutch of the Peleg, Cohen, Deutch Adv. Law firm, who represents the Ministry of Defense in several proceedings, says, "Local authorities should charge the Ministry of Defense arnona on space which have substantial daily use, and not for spaces, such as outposts, which are sometimes not even manned, and the only justification for charging arnona on them is if a regional war breaks out in the future. In the north, the Ministry of Defense pays tens of millions of shekels on just one outpost. Because of the unique characteristics of defense facilities, special classifications should be set for them, because the current situation in which every local authority charges a rate that it sees fit is intolerable, especially when local authorities do not provide services to defense facilities. Today, no local authority has a definition on how much a defense facility should pay for arnona, and the rate is the usual 35%. Outposts are considered as utilized land, and the rate on it can reach NIS 50 per square meter. Firing zones cover hundreds of acres. What's next? Charge for battlefields in time of war? After all, arnona is not a consideration when talking about defense needs. Will hangars be reduced because of arnona? If the IDF wants to procure more planes, should it pay more arnona?"
The IDF is a disruptive factor in the Negev
Local authorities see things differently. Most military installations are in the jurisdiction of regional authorities, especially in the periphery. At issue are large areas which sometimes take away extensive land from a local authority. For example, military spaces account for 75% of the 4.8-million dunam (1.2-million acre) area of the Ramat Hovav Regional Authority. For local authorities, the presence of military installations in its jurisdiction not only affects its land, but in many cases, life as well: traffic in firing zones is problematic. The extensive use of heavy military vehicles on the roads damages infrastructures, and operations faults turn extensive areas into closed military zones for extended periods of time.
"I would be happy if the Negev had more civilian enterprises," says Ramat Hanegev Regional Authority chairman Shmuel Rifman. "Civilian activity is preferable to military activity, because ultimately, it does not benefit the residents who live south of Beersheva. Massive military traffic on the roads, unceasing firing at bases, such as Zeelim, are not pleasant experiences, and I would be happy if there were more industrial zones, which we lack, than defense facilities. There is a two-sided game here by the state: on one hand, it encourages the IDF's move to the Negev not from Zionist motives, but from real estate motives, because a dunam of land in Ramt Hanegev costs NIS 15,000 compared with NIS 1.5 million in the center of the country; but on the other hand, the IDF in the Negev is a disrupting factor which delays civilian development in agriculture and tourism. In Ramat Hanegev, the IDF pays arnona like everyone else, only on built-up space, and not on utilized land. 70% of the council's 4.8 million dunam is firing zones."
Rifman adds, "We do not charge a single shekel for firing zones, training areas, or utilized land. For a base with residences, soldiers, and storerooms - yes. The jump in arnona from what was once paid is not because of a sharp increase in arnona, but because, for years, the IDF concealed information from local authorities about land inside the bases. Every three years, I send surveyors to bases to understand what's happening there. The IDF does not report what it is building, and it is not interested in reporting, even though it is required to do so. For 20 years, the IDF did not report how much it built, and this is the reason for the jump, because we made sure to survey properly. Local authorities should have gone to court to get information, and did not receive the information in the cases of classified installations. It is wrong to say that we don’t provide services. In the Negev, we collect garbage, and we're talking about long journeys and many resources. We help the IDF deal with the sand fly, and make sure that sewage is not dumped into wadis.
"90 families live at the Air Wing 25 base, and as far as I am concerned, they are residents of Ramat Hanegev. They pay arnona, and they deserve services. The council takes their children to school. At the Ramon Base, we built a daycare center and kindergarten. The IDF Training Base City is in our jurisdiction. The council passed a decision that 60% of tax revenues from the Training Base City will go to Yeruham, and 40% to the Ramat Hanegev Regional Council, but the border's commission established by the interior minister will decide on the distribution of revenues between us. If the government passes a law that the Ministry of Defense won't pay arnona, it will have to find another source of revenue, and it won't pass the court test."
Adv. Yaron Nadam of the Ben-Eliezer & Co. Law Offices, which practices in municipal taxation, says, "A local authority charges arnona on properties in its jurisdiction to finance its activity, but the concepts of 'asset' and 'hold' have very different meanings when we're talking about the Ministry of Defense. In the case of defense facilities, the duty to pay arnona for the receipt of services, makes one wonder."
Nadam says that the Majdal Shams Local Council on the Golan Heights sued the Ministry of Defense for an arnona payment of NIS 1.3 million for an IDF outpost on the Syrian border. Does a municipal directive apply to IDF bases, and are border outposts an 'asset' for which arnona should be charged? Should IDF training areas in the Negev be considered 'utilized land'? Nadam argues that in most cases, they do not consume services from local authorities, and that the law that applies to them is different from civilian law.
Municipalities will argue that the lack of economic affiliation from the asset is meaningless, and that the level of services provided by the municipality is irrelevant, because arnona is a tax. Just as an ordinary citizen cannot exempt himself from paying arnona to a local authority because it did not provide a service of some kind, the state cannot exempt itself from paying legal arnona on its assets just because a municipality does not collect the garbage from them.
A partial exemption
Nadam says that the Ministry of Defense and the IDF benefit from a partial exemption on arnona from the provisions of a Mandate-era order, which exempts the state from the duty for paying the general arnona on its assets. Over the years, the law has been amended, and in early 1995, the state was required to pay arnona at 30% of the full rate.
Nadam says that secrecy is another problem caused by the levying of arnona on IDF bases. It is doubtful if decision-makers want local authorities to have a database with classified details about IDF bases, their locations, areas, uses, and exposure of civilians to special munitions and the IDF's rolls.
In 2005, the State Comptroller ruled, "The handling by the Ministry of Defense and local authorities in fundamentally flawed." In another report, published in 2008, the State Comptroller ruled that the levying of arnona on IDF bases was not on the basis of clear criteria.
Nadam says, "There are local authorities that fight back. For example, in July 2013, the Petah Tikva Municipality sued the Ministry of Defense for over NIS 15 million in arnona payments. The municipality claims that the ministry holds several assets in the city, including the Sirkin Base. It claims that, in 2009-12, the Ministry of Defense did not pay any arnona on the base and on other sites in the city.
"Primary legislation is needed to set an arnona-like tax at the state level, and not at the individual level of each local authority, in a fixed amount on the basis of uniform criteria, which do not depend on 'built-up' space or 'land', and are not determined by the usual classifications in the arnona directive at the caprices of any particular local authority."
Published by Globes [online], Israel business news - www.globes-online.com - on August 29, 2013
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