Daily Israel Report

Finance Min: Hareidi Homebuyers Don't Need VAT Discount

Not extending a VAT discount for first time home buyers in hareidi communities is not discriminatory, the Treasury said.
By Arutz Sheva Staff
First Publish: 3/20/2014, 8:45 AM

Apartment interior (file)
Apartment interior (file)
Flash 90

The Finance Ministry said Thursday that contrary to appearances, excluding Israelis who did not serve in the IDF from being able to purchase a first-time home without paying VAT (value added tax) would not be discriminatory. The prices of homes in hareidi neighborhoods are already significantly lower than the price of homes in neighboring non-hareidi neighborhoods.

According to the proposal by Finance Minister Yair Lapid, value-added tax (VAT) would be eliminated for first-time apartment buyers. According to Lapid's plan, families who get the discount would have to hold onto the apartment for at least five years. This measure is intended to prevent couples from buying apartments for the purpose of trading in them. VAT is currently 18%.

Lapid's plan would provide the discount to Israelis who had at least one family member who served in the IDF – excluding most hareidi and Arab families, both groups that generally do not serve. Hareidi groups and several ministers, including Housing Minister Uri Ariel, have urged Lapid to make the plan inclusive. Ariel said he supported the plan, providing it was inclusive – adding that he himself had made a similar proposal several months ago.

It is not clear if Lapid's condition would stand up to examination by the High Court. In the past, National Insurance child allowance payments were given only to families who had a member serving in the IDF, or who had received exemptions from service. Arab and leftist groups sued, and after several decisions by the High Court in the mid-1990s, the government eliminated the requirement.

However, the Finance Ministry on Thursday said there would be no issue of discrimination, at least in the hareidi sector – because home prices there were already discounted, compared to the price of homes in secular communities. A typical four room apartment that went for NIS 1,235,000 in Bnei Brak, for example, would cost 30% more in neighboring Ramat Gan – and as much as 86% more in Tel Aviv. The apartments, the Ministry said, were of similar size, age, and in areas with populations with similar demographics.

In another example, the Ministry checked the prices of homes in Modiin, versus the prices in nearby hareidi community of Modiin Ilit (Kiryat Sefer). The Modiin home cost NIS 1,750,000 - 64% more than a similar home in the hareidi neighborhood.