Local Property Taxes Likely to Rise


Israelis will be paying higher local property taxes (arnona) if a proposal for giving municipalities more latitude in calculating the tax now before the Knesset Finance Committee gains approval, Globes reported on Monday.

The legislative proposal would authorize the interior minister and the finance minister to allow municipalities to change the way they calculate arnona for businesses and households.

In practice, it would permit municipalities to set arnona on the basis of a home’s area, excluding balconies and parking spaces, or including such spaces. For those municipalities that have until now been constrained by law from taxing those additional spaces, the freedom to do so could mean a big difference in revenue.

Conversely, municipalities whose historic directives allowed them to include balconies, parking spaces, and common spaces in buildings, and where neighborhoods of high-rises with large common areas were built, residents paying arnona on such spaces may see tax relief.

The proposal, which is on the Finance Committee’s agenda for Tuesday, has drawn fire from the business sector, which fears a general arnona rate hike.

Manufacturers Association of Israel CEO Amir Hayek said, “The gun that appeared in the first act is being fired in the third act. It’s hard to see a situation in which the law is amended to allow ministers to approve methods of calculation without it being used to raise arnona. We’re trying at Minister of Finance Yair Lapid’s office to change the ministry’s position ahead of the Knesset discussion.”

The Association warned that the such a change in the law will hand municipalities “a ‘blank check’ in the form of permission to collects billions of additional shekels a year in arnona directly from residents and the business sector” on areas currently defined as public space, such as stairwells and parking spaces in apartment buildings.

The Ministry of Finance said in response today, “The update of the regulations is intended to correct the current situation in which it is legally impossible to change the method of calculation, including reducing arnona payments. Changing the method of calculating arnona in line with the new regulations is subject to review by experts at the Ministry of the Interior and the Ministry of Finance, and subject to the approval of the interior minister and the finance minister.”

A highly-placed government source told Globes that the intention is to correct a flaw that shackles the ministers in cases where municipalities actually want to lower arnona.

The source explained that nothing in the Finance Committee discussion would change what he called “the rules of the game. In any case, municipalities that want to change the method of calculation will have to ask the ministers, who will use their discretion whether to approve it or not.”