Lady Luck has smiled on Finance Minister Yair Lapid. After extortion attempts by the ultra-Orthodox and the settlers, a respectable way out has opened up for him. He just needs to say he won’t submit to extortionists in fur hats and knitted skullcaps. He won’t pay them millions to support his law for zero value-added tax when buying an apartment.
- No VAT Break on Housing This Summer as Knesset Suspends Debate
- Lawmakers Seek to Raise Home-buying VAT Exemption for Israelis Who Don't Do Army Service
- Economists Urge MKs to Reject Law Exempting Home Buyers From VAT
Lapid could abandon the plan (which didn’t pass in the Knesset this week because of those extortion attempts) and not resubmit it in October when the Knesset summer recess ends. He could also add a fresh argument – that it’s more important to replenish the stocks the army is using up in Gaza; there simply isn’t enough money for the zero-VAT law.
The problem is that Lapid is sticking to his guns. He doesn’t believe those who wish him well. He’s in the thrall of political trickster Uri Shani, who knows how to cause him damage. Look at the wreckage Shani left behind at Housing & Construction and the other companies he has run.
Shani isn’t even capable of letting his boss take the credit. In a radio interview this week he said he was the one who thought the VAT plan up, not Lapid. Well, you know, beware of your friends, you know who your enemies are.
The aim of the plan is political; there’s not a gram of economics there. It’s designed to restore to Lapid the votes that have disappeared since the election. But lacking economic and political savvy, Lapid will transfer the billions, nearly all of it, to his biggest opponents: the ultra-Orthodox and the settlers. Not only will his voters receive nothing, their tax money will fund a gift to the Haredim and settlers to the tune of 25 billion shekels ($7.3 billion) over the next seven years. A huge sum.
At first Lapid tried to characterize the VAT beneficiaries as young couples who had served in the army. But this blew up when it was also decided to award the VAT exemption to ultra-Orthodox draft evaders for apartments priced up to 1 million shekels, almost all of which are in ultra-Orthodox neighborhoods. It’s easy enough to write “1 million” in the contract and pay the rest under the table.
The second group to benefit from the VAT break will be the settlers. To that end they’ve deployed Knesset Finance Committee chief Nissan Slomiansky, who exacts a toll on every law and regulation in the form of budgets and benefits for the settlers.
Slomiansky made a mockery of Lapid when he had the military-service condition apply to service of just one year, so both students at hesder yeshivas — which combine yeshiva study and army service — and religious young women who do civilian national service will be eligible for the benefits. Then he forced Lapid to agree to having the exemption apply to “free-standing homes” 150 square meters large, not just modest apartments in multistory buildings. The guys and gals who move to the territories want “quality of life.”
Thus the young couples in Alon Moreh and Beit Shemesh will live it up, but great sadness will descend on Lapid’s voters in Tel Aviv and the center of the country, where it’s hard if not impossible to find an apartment for 1.6 million shekels. That is, Lapid’s voters won’t benefit from the VAT break; it will all go to the settlers, the ultra-Orthodox and the contractors.
Lapid and Shani also don’t fathom that the number of secular young couples from the center of the country who will stand on line and not receive an “inexpensive” apartment is much greater than the number of ultra-Orthodox and settlers who will receive one. The political damage will be huge, never mind the damage already done to the construction industry, now in four years of stagnation, which is impeding economic growth and tax collections.
Lapid can still come to his senses. He must listen to those who wish him well – both inside and outside the Finance Ministry.