The property tax is stuck in the age of the sponge: so an important process is left behind

Even when you open the envelope that comes from the municipality with the bi-monthly payment voucher for the property tax, at most you look at the voucher to remember the area of ​​the apartment and make sure that there is no change in the amount of payment required. But who delves into the method of measurement or the different rates of the annual price per square meter in an apartment in different cities?

Please familiarize yourself with the three common methods for calculating the area of ​​the apartment:
Gross-Gross: The area of ​​debt is measured between the outer sides of the outer walls that surround the apartment, including the area on which the outer walls stand.

Gross Net: The area measured is the space between the inner sides of the outer walls.

Net-net: The area is measured between the inner sides of the outer walls, with a generous offset of the area on which the inner walls of the apartment are built. This is the area that can be reached with a broom and a mop, and therefore the cynics among the property tax experts have dubbed it the “sponge area” (Tel Avivians relax – this is the method in the city).

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One of the most prominent absurdities in the field of commercial property taxes stands on Ben-Gurion Road, a street whose northern section separates Ramat Gan from Bnei Brak, and later, in its southern part, it separates Givatayim and Ramat Gan. In the northern section, on either side of the street, stand, opposite each other, two completely identical office towers of the Besser company.

Adv. Henrik Rostovich, an expert in municipal property taxes, made the following calculation: The property tax rate of an office in Ramat Gan is NIS 357 per square meter per year, and in Bnei Brak it is NIS 326 per square meter per year. While in Bnei Brak, each ministry also attributes a relative share in the common areas, which are about half of the ministry’s area.

The result: a 100-square-meter office on the Ramat Gan side will be charged NIS 35,700 a year, and an office of the same size in Bnei Brak will pay NIS 48,900 a year. In the southern section of the street, which separates Givatayim and Ramat Gan, there are similar absurdities.

“Deficit burden on the municipality”
At the end of the budget approval procedures and the Arrangements Law, it became clear that the proposal in the Arrangements Law for the reform of the property tax not only fell out of the chapter, but also disappeared from the discourse.
The proposal was justified as an important move to create a momentum for residential construction, which may lead to a restraint of the madness of rising apartment prices. The method chosen relied on encouraging mayors to calm the desire to attract mainly high-income businesses, and to stop treating residential construction as a “deficit burden on the municipality”, which stems, among other things, from municipal failures in collecting residential property taxes.

The proposed method: raising the property tax by 1.5% per year for the ten years to 2032 and the mechanism of raising tariffs, and at the same time – reducing the business property tax by 10% starting in 2022 and another annual reduction mechanism. Mayors raised both eyebrows and angry phone calls to the Interior Ministry.

The practice of property taxes concerns the core of the relationship between the central government and the local government. The municipalities prepare two-year property tax orders, and the interior minister approves or disapproves. Changes are proposed for example in classifications, exemptions and discounts for certain populations. In this policy, each interior minister has his or her own preferences and calculations regarding the balance of his or her relationship with such a municipality or other regional council and regarding populations that are close or not close to his or her heart.

Discount to Sherry Arison
It will soon be ten years since the conclusions of the property tax reform committee, set up by Interior Minister Roni Bar-On in 2007, headed by Adv. In the 257 local authorities: thousands of different and weird classifications and sub-classifications and dozens of measurement methods, exemptions and discounts.

Several events made the committee members laugh. A huge restaurant owner accepts that the entire area he owns is subject to expensive commercial property taxes, but the large kitchen must be subject to much cheaper property taxes, according to an industry classification. A senior Prison Officer appeared before the committee, presented a modern version of the “prisoner dilemma,” and argued: We take our prisoners out of cells for trips and sports in the prison yards, but the “fenced yard” rate is much higher than the “unfenced yard” rate. I want to save, so maybe we’ll lower the fences in the courtyards of the prisons?

The committee also discussed whether Sherry Arison is entitled to a substantial rebate on her household property tax, since she is a single mother. This discussion gave rise to a study of the idea that there is room for subjecting exemptions and rebates to income tests.

Increasing VAT instead of property taxes
The main self-evident recommendations of the Barzilai Commission were: to abolish the thousands of classifications to a shortlist. In the first phase, the limited list will include classifications of residential, commercial, office, industrial and state-owned areas.

A radical idea that came up in the committee, with the support of the Ministry of Finance – which transfers NIS 3.3 billion in balance grants to municipalities each year – was the abolition of municipal property taxes and an increase in general VAT by 1.5% -2%. It is possible to neutralize the problem of tariffs, collection expenses and the problems of regional disputes, for example the Dead Sea communities rich in property taxes compared to their neighbors in Dimona, in a kind of distributive justice.

There is debate in this regard as to which taxes are more regressive and more detrimental to the weak. Another far-reaching idea was to determine the property tax according to an authorized assessment of the value of the property and not according to the area, in an updated report every five years (the appraisers will be happy).

Ayelet Shaked (Photo: Yonatan Zindel)

In the drawers of the interior ministers
The general proposal of the committee was to give additional powers to the municipalities, thus making a serious mistake: entering the problematic arena of relations between the interior ministers and the mayors. This is the source for freezing the recommendations.

And these are the names of the interior ministers who received the recommendations of the Barzilai committee, and at the behest of learned people called the members of the committee for discussions, at the beginning of which compliments to the committee and at the end buried the recommendations even deeper in a drawer. By order: Meir Sheetrit, Eli Yishai, who was particularly interested in rates and exemptions for “educational institutions”, Gideon Saar, Gilad Ardan, Silvan Shalom, Aryeh Deri (an ardent supporter of a large family with many children Internal Affairs in the Ministry of the Interior (“Examining the Recommendations of the Barzilai Committee”, the traces of which have disappeared).

Today, the recommendations are raising dust in Ayelet Shaked’s drawer. The impression of the committee members was that more than the mayors are afraid of the interior ministers, the interior ministers are more afraid of the mayors.

“Upside down, Guta”
Of the ideas thrown up again and again about the property tax, the most populist is that the empty apartments, known as “ghost apartments” should be charged – and especially things aimed at apartments of Jews living abroad and used for the annual holiday or son’s bar mitzvah celebration – double and multiplied.

This idea can be quoted, only with a half-smile: “Upside down, Guta, upside down.” It may even be necessary to set a reduced property tax for such apartments, since their owners do not erode the sidewalks, do not use public gardens, produce almost no garbage and the like.

Bottom line: there is constant tension between interior ministers and mayors over powers, and it reaches a balance of terror, and as long as these relations do not reach a plausible settlement, there is no chance of tax reform. Without ten years of treatment and evasion from a serious discussion of the recommendations of the Barzilai Committee and decisions on the fundamental problems in the field that are of great importance in the cost of living, the property tax is still stuck in the sponge age.


Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.

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