The Knesset plenum approved in first reading the 'Zero VAT' bill initiated by Finance Minister Yair Lapid. The bill was accompanied by private proposals from MKs Miri Regev, Meir Sheetrit, Gila Gamliel, and Israel Eichler.
The bill seeks to grant VAT exemption to first-time home buyers. According to the law, one of the conditions for receiving the benefit is military or civilian service. This clause has sparked opposition among Knesset members from the Haredi and Arab parties.
The explanatory notes to the proposal state: "In order to try and bring about a reduction in housing prices even in the short term, steps must be taken to immediately reduce apartment prices... The meaning of zero-rate VAT is that the contractor can reclaim the input VAT he paid and will not have to transfer transaction VAT for the apartments he sold.".
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Since the VAT component constitutes over 151% of the total apartment price, this immediate reduction could help tens of thousands of young couples purchase an apartment at prices significantly lower than current market prices.
The proposed law provides an increased benefit to those who served in the Israel Defense Forces, as well as to those who served in national service, national-civilian service, or civilian service as defined in the proposed law. Providing an increased benefit to this contributing population is part of the state's gratitude and reward towards a population that performed service for the benefit of the public while carrying a personal and financial burden, and an expression of the financial hardship they suffered as a result of their service. Providing the benefit as stated is another layer in encouraging citizens of the state to perform military service or national-civilian service.".
Finance Minister Yair Lapid presented the bill and said: "The bill before you seeks to give an opportunity to young middle-class couples who until now have not been able to purchase an apartment. Besides the significant benefit that this law will provide to those couples, it also changes the equation that has existed until now: instead of the state earning billions at their expense, the state is willing to spend billions for them. They see this and understand that this time the state is serious, and prices will really go down.
It should perhaps be emphasized: this is not a temporary order, but a law. It will be in effect for another year, another two years, another ten. And since this benefit is here to stay, we, by the way, recommend that these young people wait as long as they can to buy their first apartment. Those who wait will make a lot of money, because the more time passes, the more apartment prices will drop.
According to the criteria we set out in the law, those who have served national or civilian military service will receive a much greater benefit than those who have not. The State of Israel is allowed to insist on its values, and it is allowed to decide that there is a connection between granting rights and those who fulfill duties, and that is what we did. I have heard the critics who have come out against the principle we have insisted on. I say it again - military service, whether civilian or national - is a sacred value of the State of Israel, and the role of the state is also to preserve and protect its values.""
MK Miri Regev: "I am very happy that today we are passing a bill that I submitted in the previous Knesset and that was defeated by my government and a finance minister from my party. The finance minister deserves praise, it is permissible to say such things. At the same time, it must be said clearly and unequivocally that this bill does not solve the problem of housing prices in the State of Israel. In order for housing prices to go down, we cannot continue to speculate on land, and this is one of the main functions of the housing cabinet.""
MK Meir Sheetrit: "I suggest that the Minister of Finance not be alarmed by economists who oppose the move. The move is the right move. There is no justification in the world for charging a young couple hundreds of thousands of shekels in taxes. The economists who see black women are not always right. It is true that this does not solve all housing problems, but it helps and it is a first step. We need to take into account that there is discrimination here that the High Court of Justice could abolish. Maybe it is better to avoid and abolish the discrimination.""
MK Gila Gamliel: "The plight of young couples in the country needs to be addressed immediately here and now, in parallel with long-term strategic plans.""
""Brings hostility between citizens""
MK Israel Eichler: "The very fact that the Knesset is about to enact a government decree that discriminates against two million citizens, and only gives a certain group that chose Yesh Atid, is a racist bill against Arabs and anti-Semitic against Jews. While we see rulers in all nations of the world who have not understood the seriousness of their actions, the government and this Knesset should know that this leads to enmity between citizens. You are tearing apart all the last threads of coexistence here. The government is oppressing and robbing the citizens. Those who use force will pay the price of force. You are going to war and we are calling you to peace."
MK Muhammad Baraka of Hadash: "The discrimination is understood within the bill, and therefore it is possible that this bill will ultimately be rejected. This bill is incorrect and disproportionate. I do not think that military service is a sacred thing, and people cannot be punished for such a thing. Ethically, the most sacred thing is life, not military service. This is a bill against Arabs, against Haredim, and against weak strata. Does the state treat all citizens equally? Otherwise, how can we explain the poverty rates among Arabs and citizens? The state has been conducting a policy of a thousand times since its establishment until today. All of this is cheap demagogy by a person who wants to survive politically, and therefore speaks to a certain public.
MK Nachman Shai: It's not a disaster to make mistakes, the wisdom in mistakes is to recover from them in time and say I was wrong. The Minister of Finance insists on his mistake and ignores all opinions. The entire professional staff at the Ministry of Finance opposes the plan, they told him to wait a moment, think about the implications for the economy, he was impassive and ignored them. The Governor of the Bank of Israel came out against the plan today. The Knesset's legal advisor said explicitly today that this proposal is not Greek. We are single-handedly pushing the word no to the Supreme Court.
MK Moshe Gafni: There is no logic in this law and everyone knows that it will not lower apartment prices even by a shekel, while the State of Israel will invest 30 billion shekels in this nonsense. The Minister of Finance is wasting the dwindling treasury to enrich contractors. Regarding discrimination, everyone is saying this, from the Attorney General to the Knesset Attorney General in a fatal opinion we received today.
MK Mickey Rosenthal: How do you define bribery? Using a public resource for private purposes. What is meant here is a bribery exercise, and if it is not buying votes with money, then I don't know how to define what bribery is. This bill is a racist bill.
MK Boaz Toporovsky: "Regarding the opinion of the Knesset's legal advisor, I think there was enough time to send it before the discussion and not right during the discussion. The timing is puzzling and strange and it's a bit not serious.""
MK Yitzhak Herzog: The law that is coming here has a very problematic manipulative element. There are discriminatory and exclusionary elements here. I think we are heading for a complete fiasco and a problematic failure. There is a feeling that there is some kind of revolution here, but anyone who understands sees today a stagnation in apartment sales, a very difficult laboratory experiment on humans. A great danger that will not serve the main purpose.
The government bill by Finance Minister Yair Lapid was supported by 31 MKs, 18 opposed, and one abstained.
MK Miri Regev's proposal was supported by 37 MKs, 7 opposed, and 2 abstained.
MK Meir Sheetrit's proposal was supported by 36 MKs, 5 opposed, and 3 abstained.
MK Gila Gamliel's proposal was supported by 38 MKs, 3 opposed, and 3 abstained.
MK Yisrael Eichler's proposal was supported by 35 MKs, 7 opposed, and 2 abstained.
The proposals will be forwarded to a Knesset committee that will decide where they will be prepared for second and third reading.
""To be regulated so that it meets constitutional tests""
In an opinion issued in response to a request from MKs Moshe Gafni and Stav Shafir, the Knesset Legal Advisor, Attorney Eyal Yinon, details the difficulties he sees in the proposed arrangement, in three main areas: first, the economic criticism of the bill and its implications for constitutional review; second, the discrimination in the bill between different groups in the population; and third, the difficulties created as a result of the manner in which the benefit is distributed among the group serving in the military and in civilian service.
The Knesset Legal Advisor clarifies that although the purposes underlying the bill, namely reducing housing prices for first-time home buyers and expressing the state's gratitude to service members, are worthy purposes, the manner in which these purposes are fulfilled in the bill does not sufficiently take into account the constitutional limitations arising from the right to equality. This is especially true considering that the bill seeks to deal with the problem of housing prices in Israel, which is not unique to one sector or another, but concerns all citizens of the country.
The consultant concludes his opinion by stating that if the proposal is approved on first reading, the Finance Committee must amend it so that it meets the accepted constitutional tests.
