An ambitious plan by Finance Minister Yair Lapid to exempt certain first-time buyers from paying value-added tax on home purchases has spawned a controversy. The proposal was presented in person to Prime Minister Benjamin Netanyahu. In addition, Bank of Israel Governor Dr. Karnit Flug, Housing and Construction Minister Uri Ariel and Lapid also attended the meeting where the plan was unveiled. Flug and Professor Eugene Kandel, head of the National Economic Council in the Prime Minister's Office, vehemently opposed the step, and Finance Ministry officials principally objected to imposing different VAT levels on different items. Yesh Atid criticized Flug on Tuesday, saying, "How can the person in charge of an institution that has failed to lower housing prices -- and who was part of the major decision-making process for many years -- attack this courageous move which gives immediate answers to couples who cannot afford to buy an apartment. Even though the plan is slated to cost the state money in the tough reality our predecessors, including the Bank of Israel, left us -- the decision comes at the right time and place." "We proposed the plan in April but it was rejected by the Finance Ministry because of the 2 billion shekel [$580 million] expense," Ariel said in an interview with Channel 2. "We are working on improving the project. My children ask me if they should buy an apartment and I tell them to wait until the plan matures into legislation. In four months, new regulations will start." Plan will only raise demand The plan -- exemption for married couples with at least one child, and at least one partner having served in the army or national service -- has spawned criticism among individuals and groups falling outside the criteria, like the ultra-Orthodox and Arab communities. "The finance minister continues his cruel plan to harm the ultra-Orthodox and Arabs," MK Menachem Eliezer Moses (United Torah Judaism) lambasted the initiative. "Even when he promotes a blessed plan, he makes sure to exclude the most vulnerable layers of society." Responses within the real estate industry were mixed. The president of the Israel Builders Association Nissim Bublil congratulated the plan while chief economist at IBI investment firm, Rafi Gozlan, admonished that the solution encourages demand rather than of slowing it down. Only couples who have not owned an apartment previously can apply for the tax break and those who qualify can opt for a three-to-four bedroom apartment worth up to 1.6 million shekels ($460,000). The VAT exemption could cost the state between 2 billion and 3 billion shekels ($580 million to $870 million) a year. The proposal still needs government approval and to pass through the Knesset Housing Committee next week. Beginning in Tel Aviv, Finance Minister Lapid recommends 3-year rent control Lapid plans to bring a proposal to the ministerial Housing Committee next week that would only allow landlords to raise rent once every three years, in addition to allowing landlords to raise the rent if the index increases. Tel Aviv would be the first city where the law would be implemented. The city's municipality would regulate rent prices by overseeing all apartment leases. Only after three years, renewing the lease and setting a new price would be optional. Finance Ministry officials feared the bill would not be enforced because of the high turnover of tenants in nearly half of all Tel Aviv apartments. They also worry that limiting rent increases could spawn a black market and duplicate leases -- a mock-up to show the municipality and a real lease signed with tenants under the table.
