Netanya real estate
VAT benefits on housing for veterans isn't right. Photo by Ofer Vaknin
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The uproar over Finance Minister Yair Lapid’s proposal to cancel value-added tax on the purchase of a first (new) apartment for people who have done military or civilian national service has exposed the tip of the iceberg of the proposal’s constitutional and moral flaws.

Under this proposal, which was unveiled Sunday, anyone who didn’t serve in the Israel Defense Forces or do civilian national service would be exempt from VAT only when buying a first apartment costing up to 600,000 shekels ($174,000). The proposal reflects a compromise between the treasury and the Justice Ministry, after the attorney general objected to Lapid’s original proposal: denying VAT breaks to people who haven’t done military or civilian national service.

Yet immediately after it was unveiled, the proposal was exposed in all its nakedness. In the Israel of 2014, new apartments costing 600,000 shekels or less are virtually nonexistent.

Amid the harsh criticism, intervention by Housing Minister Uri Ariel and, above all, fears that the law would be impossible to defend at the High Court of Justice, the treasury raised the ceiling to 950,000 shekels, reducing the gap between the value of the benefits given the various groups.

This decision relied on a historic High Court ruling (the Bishara case) stating that military service can be taken into account in awarding housing benefits, but it cannot be a condition for receiving such benefits. The court also imposed stringent restrictions, ruling that the gap between the benefits granted various population groups cannot be large.

Even though the current proposal reduces discrimination, it must be opposed, just as similar proposals have been. It, too, contains a fundamental element of discrimination and creates different social castes. On the one hand, there are those entitled to benefits – the “better citizens,” as the finance minister put it – who consequently are also entitled to more expensive housing in more desirable locations. On the other hand, there are the “worse citizens” — the Arabs and ultra-Orthodox Jews, who tend not to serve in the IDF.

The state should incentivize the contribution of veterans of the IDF or civilian national service. But the way to do so isn’t by depriving other groups of benefits. The state’s appreciation for its soldiers can be expressed by paying higher wages to soldiers in compulsory service, a move that would naturally benefit only people who serve in the army. Discriminating against groups that are worse off economically will only increase their estrangement from the state and perpetuate the economic and social gaps between them and the rest of society.

Over the past few months, the government has energetically promoted racist, discriminatory legislation, especially toward Israel’s Arab citizens. Attorney General Yehuda Weinstein must rein it in and immediately reject the VAT proposal, too.