Netanyahu Blocks Lapid’s zero-VAT Plan

As Yesh Atid threatens coalition crisis, ultra-Orthodox MKs vow to filibuster against bill in Knesset.

Zvi Zrahiya
Zvi Zrahiya
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Yair Lapid at Sapir College, Sderot, September 3, 2014.
Yair Lapid at Sapir College, Sderot, September 3, 2014.Credit: Liron Bouzaglo
Zvi Zrahiya
Zvi Zrahiya

Prime Minister Benjamin Netanyahu ordered the coalition chairman on Monday night to halt work on Finance Minister Yair Lapid’s flagship bill, which calls to exempt some first-time homebuyers from value-added tax. In response, Lapid’s Yesh Atid party threatened a coalition crisis.

Earlier Monday, the Knesset Finance Committee had approved most clauses in the bill thanks to a compromise with ultra-Orthodox committee members. From there, the bill was set to be discussed in the House Committee.

Finance Committee chairman Nissan Slomiansky of coalition party Habayit Hayehudi called on the House Committee to convene next week to discuss the bill. But Yariv Levin, who is House Committee chairman and also coalition chairman, said Monday night that he could not call for a discussion on the legislation until disagreements regarding funding for the proposal had been settled. “We can’t discuss the zero-VAT bill separately from the state budget,” he said.

Yesh Atid sources took objection to Levin’s declaration, stating, “The zero-VAT bill was approved by the cabinet and by Netanyahu. If Netanyahu is deciding to freeze the bill, or the bill is frozen in the House Committee, then that’s a clear violation by the prime minister that will cause a serious coalition crisis.”

Channel 10 reported last night that Netanyahu had ordered work on the bill frozen until funding negotiations were settled with Lapid. Yet sources in Netanyahu’s bureau and Levin himself denied that the prime minister had issued a stop-work order for the bill.

Knesset sources had said earlier in the day that if Netanyahu did not push to have the House Committee convened promptly, that would be a sign that he does not support the bill.

Despite the agreement reached in the Knesset Finance Committee on Monday, ultra-Orthodox MKs vowed to keep fighting the plan. In order to gain the committee’s approval, Slomiansky reached a compromise with opposition MK Moshe Gafni (United Torah Judaism), stating that discussions about the bill’s cost will continue only after Finance Ministry officials address the issue in committee.

Ultra-Orthodox MKs have termed Lapid’s plan “a bad bill that will cause billions of shekels in waste.” Gafni vowed that Haredi MKs would carry out a filibuster against the bill when it comes up for discussion in the Knesset plenum in November, and “paralyze” the process with more than 2,000 objections.

The bill – which has proven controversial, drawing opposition from economists as well as the Bank of Israel – would allow some first-time homebuyers to be exempt from VAT on new homes purchased from the contractor that cost 1.6 million shekels ($441,000) or less. Lapid has heralded it as relief for young families struggling in the face of home prices’ meteoric rise, but critics say the plan will cost the government billions while in practice causing home prices to rise even higher.

Monday’s debate in the Finance Committee stemmed from a statement by Lapid to Channel 2 earlier this week. Lapid told the TV news channel that implementing the bill would not actually cost 3 billion shekels a year, a number he termed “fictitious.” In practice, the bill would cost 1.3 billion shekels next year, he said.

Finance Ministry deputy budgets director Eran Nitzan and Housing Ministry director general Shlomo Ben Eliyahu told the committee last July that the bill would cost 2.5 billion shekels a year. Treasury officials had previously told the committee that implementing the bill would cost 3 billion shekels. Yesh Atid declined to address the discrepancy between Lapid’s estimate and treasury figures.

Finance Committee Chairman Moshe Gafni Credit: Emil Salman

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