Israeli Lawmakers Back Controversial Housing Tax, but New Vote May Be Set

Hasty, overnight deliberations arouse ire of many lawmakers, Knesset legal expert.

United Torah Judaism MK Moshe Gafni, left, at a meeting on the housing tax, December 19, 2016.
Emil Salman

The Knesset Finance Committee last Friday approved Finance Minister Moshe Kahlon’s controversial plan to impose a tax on Israelis owning three or more homes – or maybe it didn’t.

The panel voted in favor of the proposal after seven hours of debate, but it only received the final draft of the legislation from the treasury at 8 P.M. Thursday night, when it was in the middle of other deliberations. It didn’t begin discussion on the tax until later.

Protesting how little time the committee was being given, opposition lawmakers walked out of the session and didn’t vote. Neither did MK Moshe Gafni (United Torah Judaism), who angrily left the Knesset after the treasury turned down his proposal to amend the legislation.

The tax was finally approved at 7 A.M. on Friday. But on Sunday, both Knesset Speaker Yuli Edelstein (Likud) and Knesset legal adviser Eli Yinon said the committee would have to hold more deliberations and vote again.

Yinon said that given how complicated the proposal was, and that it included criminal penalties for people who violate it, lawmakers should have been given at least several hours to study the final draft. He added that they were given the draft at the end of a day of intensive deliberations on other issues.

Opposition lawmakers, meanwhile, were threatening to petition the High Court of Justice.

But Gafni, who said he rushed through the deliberations and vote at Kahlon’s behest, was unmoved by Edelstein’s request. “I don’t want to hold another debate. If the Knesset speaker demands it, he can find someone else to chair the [committee] meeting,” he said Sunday. “Someone should have stopped the process on Thursday night.”

Kahlon has been pushing hard for the tax, which he hopes will deter property investors by raising the cost of investing in residential real estate and rein in soaring home prices. Last Thursday, the Central Bureau of Statistics reported that home prices rose 8.7% in the 12 months through November – its highest increase since the start of 2014.

Kahlon hopes the new tax will coax many into selling properties they own and deter them from buying new homes in competition with people looking for a place to live.

But many real estate experts dispute that, and tenants’ rights advocates fear that the cost of the tax will be passed on to renters.

Under the legislation approved by the finance committee on Friday, the 1% tax on a home’s value will be imposed – starting January 1 – on people who own three or more residential properties. The maximum tax that can be collected on each of the properties will be 18,000 shekels ($4,675) a year (with some exceptions), starting with the third home.

At the last minute, the treasury had sought to raise the ceiling to 24,000 shekels – but Gafni rejected the change. He also blocked the ministry’s proposal for jail sentences of one to five years for people who failed to file tax records on their homes or falsified their reports.

People with a combined 249% stake in three or more homes will be liable for the tax, but they will be exempt from the tax altogether if the combined value of two of the three properties is less than 1.15 million shekels.

Under the terms of the legislation, which the full Knesset must still vote on, people who sell homes liable for the tax before October 1, 2017, are entitled to get back as much as 75,000 shekels from the improvement tax they are normally required to pay.