IMF Discusses Israeli Real Property Tax Reform Agenda

by Lorys Charalambous, Tax-News.com, Cyprus

29 March 2017

The International Monetary Fund has commented on Israel's recent reforms to property tax measures, which were intended to cool the property market.

Measures have include higher transaction taxes on second or subsequent homes until the end of 2020; the introduction of a recurrent property tax on owners of three or more houses; and partial exemptions from capital gains tax on sales of residential properties until the end of 2017, with full exemptions on investing proceeds of sales in the capital markets.

The Fund said that some measures were useful, "but some initiatives are costly and may not have lasting benefits."

"These tax changes may dampen price rises in the near term owing to investor sales, but focusing a recurrent property tax on investors could over time raise rental costs for low-income households, and the ceiling on monthly tax payments is regressive," it said.

Elsewhere, the IMF said that Israel could ensure adequate land supply for housing by allowing municipalities to promote its use through charging taxes on undeveloped privately held land.

It said that the property tax measures may moderate price increases in the near term but recommended that the country introduce a new recurrent property tax on owners of three or more residential dwellings to generating additional revenue of ILS0.9bn (USD0.25bn) per year.

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