Cabinet Waves VAT Bill Through

The cabinet voted its unanimous approval on Sunday for Finance Minister Yair Lapid’s controversial bill to exempt some first-time home-buyers from the associated 18% Value-Added Tax.

The proposal has been assailed on both constitutional and economic grounds — for discriminating against chareidim and Arabs who have not served in the military, and as likely to be counter-productive in addressing the country’s severe housing shortage.

Recently, the maximum cost of apartments available for non-military or national service veterans was from NIS 600,000 — which excluded almost all apartments — to NIS 950,000. Still, IDF veterans and national service alumni, on the other hand, can receive the benefit for apartments up to NIS 1.6 million in price.

The discriminatory nature of the bill has prompted warnings that it will face serious legal challenge, and the High Court might well strike it down.

The law has also been criticized for doing nothing about the main cause of the spiraling booming cost of housing: a lack of supply. A tax break of this kind, economists have argued, will increase demand, already booming because of low interest rates.

“This bill will cause harm to the housing market and blatant discrimination against large parts of the Israeli public,” Meretz MK Zehava Gal-On said on Sunday. Gal-On suggested instead that IDF veterans should receive better pay during their years of service rather than through benefits later.

The Finance Ministry estimates that the plan will cost NIS 2.4 billion a year, up 20 percent from the original NIS 2 billion estimate, which has further lessened its attractiveness.

The bill must still gain approval by the Knesset Finance Committee before being referred to the plenum.

This article appeared in print on page 7 of the June 23rd, 2014 edition of Hamodia.