IKEA claims Netanya mayor, city hall acted in bad faith
How much is a mayor's promise worth? That question is being cleared up in a Netanya Court right now, after the Netanya municipality filed suit against furniture retailer IKEA for NIS 1 million in back property taxes.
How much is a mayor's promise worth? That question is being cleared up in Netanya Magistrate's Court right now, after the Netanya municipality filed suit against furniture retailer IKEA for NIS 1 million in back property taxes.
IKEA opposes the claim, saying Netanya mayor Miriam Feirberg promised the company tax breaks on arnona (municipal property tax) in return for locating the prestigious retailer's branch in the Netanya jurisdiction.
"Before the construction of IKEA's branch in Israel, senior municipal officers, including the mayor, promised that arnona would be charged at NIS 31.95 per meter, and that payments would be deferred for two years," former IKEA Israel CEO Gil Unger states in an affidavit.
Unger says the decision to establish the Sweidsh company's first branch in Israel inside Netanya's jurisdiction relied on that promise, a promise the municipality did not fulfill.
Unger added that the Netanya municipality also promised to allow the future store to open on Saturdays. Unger continues in the affidavit that IKEA has claims against the city regarding Saturday operations as well.
Netanya countered that it does not deny that breaks on arnona rates were discussed but claims no promises were made other than a promise to act through the Interior Ministry to try to reduce the taxes charged.
Netanya filed in its response that it had explained to the furniture company that it would seek Interior Ministry approval for a reduced arnona rate, adding that the municipality "barred by law from making such discounts itself in order to prevent local authorities from giving deals that contribute to their own operational deficits."
Netanya says the request to reduce arnona for IKEA was rejected by the Interior and Finance Ministries. The city's legal counsel added in pleadings that "IKEA is a multinational corporation will versed in relevant legislation and retaining experienced legal counsel, so it knew the city could offer nothing but goodwill."
IKEA counterclaims that the municipality and mayor "acted in bad faith and a lack of fairness in proffering an administrative promise in order to convince the company to establish its business in Netanya. After the branch was constructed in the Netanya jurisdiction, the city is not fulfilling its promise."
Unger added in his affidavit that in light of the difference in arnona charges, he met with municipal financial officer Danny Bruchman and treasurer Lee Dror, and it was agreed the city would honor its original promise.
The court documents reveal that since its establishment, IKEA Israel had paid property tax to Netanya according to the lower rate it claims to have been promised, despite being billed at the higher rate. The accumulated difference between the two rates amounts to about NIS 1 million.
Feirberg has not yet been required to file an affidavit but this may be the next stage in the legal battle.