MK Rabbi Gafni: Kachlon’s Apartment Tax Won’t Pass My Committee

Although Finance Minister Moshe Kachlon has put a great deal of effort into developing his proposed law to impose a special tax on Israelis who own three apartments or more, the proposal must pass the Knesset Finance Committee before it can be voted into law – and in a speech before a group of insurance industry executives, committee chairman Rabbi Moshe Gafni said that he did not think the tax was a good idea.

In fact, “the tax on multiple apartment ownership will not pass the Finance Committee,” he said. “The entire Arrangements Law, which the tax is part of, is an embarrassment for the Knesset,” because it contains dozens of proposals that were never investigated or inspected in-depth – like Kachlon’s tax proposal.

Beginning January 1st, Israelis who own more than two apartments will pay a special tax, if Kachlon has his way. Under his proposal, landlords will pay a 1 percent tax per month on the assessed value of each home or apartment they own, beginning with the third property, up to a limit of NIS 1,500 per month, a total of NIS 18,000 a year. As the average value of homes in most cities is more than NIS 1.5 million, it is expected that most of the Israelis who will have to pay the tax will pay the full amount.

The rule is expected to affect 50,000 people, who own a total of 180,000 homes. The value of the home will be determined by a government-certified assessor, based on home value data supplied by the Central Bureau of Statistics for each geographical area.

But according to the investors, the proposal retroactively harms their investments, in addition to unfairly harming investors in apartments in the north and south, where housing prices and rents are lower. The tax they will have to pay will end up being a far higher percentage of the total rent they can recover than in the higher-priced center of the country, they said.

Rabbi Gafni said that his concern was that the tax would have at best no effect on the market, if not make things worse. “Previous ideas like this, like raising the purchase tax on apartments, did nothing to stem the rise in housing prices,” he said. “Instead of dealing with the root of the problem, especially the land-trading and hoarding that the state is engaged in and instead increasing the supply of land available for construction, we are trying to fix the wrong problem.” Rabbi Gafni suggested that Kachlon return to the drawing board and come up with a proposal that “will truly increase the supply of housing and lower prices.”