Kahlon (left), Yoav Galant (right)
Kahlon (left), Yoav Galant (right)Flash90

The Israeli Supreme Court has thrown out a law imposing a tax on owners of multiple housing units, ruling on Sunday that the drafting and passage of the law were fundamentally problematic.

The law, passed by the Knesset last December, imposed a 1% tax on rental income for property owners with three or more housing units in Israel.

The 1% tax, which is capped at a maximum of 18,000 shekels ($4,960) per year, is in addition to existing taxes on income from rent. The exemption from taxes on rental income, however, stands at close to $13000.

Finance Minister Moshe Kahlon (Kulanu) championed the tax as a means of inducing investors and renters to sell properties and increase the number of homes available for purchase, though some economists have expressed skepticism over whether the law would in fact have significant effect on housing costs.

Ministry officials claimed the tax would affect 50,000 property owners and as many as 180,000 housing units.

Opposition parties vowed to challenge the law in court, claiming that it had been passed without proper debate or committee hearings. In 2016, Finance Committee Chairman Moshe Gafni (United Torah Judaism) refused Knesset legal advisor Eyal Yinon’s request for an additional hearing on the law and a revote in the committee, following a walkout by opposition MKs.

This March, the Supreme Court issued an injunction against the tax, blocking its implementation until the court rendered a decision on the law.

On Sunday, the Supreme Court ruled that the law had not been properly passed by the Knesset, and ordered that it be nullified until it was reviewed by the Knesset Finance Committee.