Inequality in Distribution of Local Tax

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IEC's Reading Power Station, north Tel Aviv. Credit: Moti Milrod

In 2014, the state paid local governments arnona municipal taxes amounting to around 900 million shekels ($230 million) on state-owned properties. A significant proportion of that amount went to wealthy communities, as it does every year, enabling them to further increase their revenues. A much smaller part went to struggling communities.

Adding the arnona paid by government companies, such as Israel Electric Corp. and Israel Aerospace Industries, brought the total to around 1.5 billion shekels. An effort to answer the basic question of “who gets how much, and why” reveals a shadowy system of privileges that operates without any public debate. In some cases, the rubrics by which the funds are disbursed have not been reviewed or updated since their introduction decades ago, under very different circumstances. The result is a widening of the gaps between a small number of wealthy communities and other communities that lack luck, power or political connections.

Arnona from government agencies is a major component of the independent revenue of every locality: In the past five years, Israel’s most disadvantaged communities increased their revenue by 3 percent, while that of wealthier communities jumped 16 percent in the same period. As reported by Or Kashti (Haaretz, September 4), the Defense Ministry accounts for over half of all arnona payments by government agencies, for military bases and other army facilities. Fully 46 percent of military arnona payments went to regional councils that account for less than 10 percent of Israel’s population.

That figure is infuriating, particularly in light of the fact that other communities near army bases receive nothing. Kiryat Ekron, for example, gets nothing while the Givat Brenner Regional Council does receive arnona funds from the army; Hatzor Haglilit gets nothing while Rosh Pina gets funds. Givat Brenner and Ramat Hasharon, another community that receives considerable government revenue, exemplify an additional injustice: Because in the mid-1950s they were classified as “immigrant towns,” they receive the full amount of arnona from military installations and not a reduced amount like every other community.

Defense Ministry officials say they proposed that the Interior Ministry should disburse the military arnona payments as it sees fit, but that is unlikely to happen, in part because it would put the Interior Ministry in confrontation with the wealthy local governments.

Despite recognizing the inequality in the distribution of arnona revenue, the government has done too little to change it. The redistribution of revenue between some of the regional councils in the Negev and communities such as Dimona and Yeruham, which began last year, should serve as a model for introducing change throughout Israel that should have been introduced decades ago.

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