By Amiran Barkat
and Drior Marmor
The Finance Ministry is recommending to Finance Minister-designate Moshe Kahlon a 20-percent tax on purchases of housing for investment purposes. Kahalon has already declared he intends to introduce a steep tax hike within the framework of the coalition agreement his Kulanu partyy signed on Wednesday with the Likud.
The agreement does not specify the rate of the new tax, which applies to purchases of apartments by people who do not intend to live in them. Kahlon spoke of raising the purchase tax to 25%, but he would be satisfied with 20%, people familiar with the matter told Globes.
An internal probe by the Finance ministry Budget Department showed that a 20% tax would e optimal for state tax revenues, while a higher rate would reduce tax revenues due to a sharp drop in the number of deals.
The measure is quite dramatic, amounting to hundreds of thousands of shekels for an average apartment. The current tax on housing for nonresidential purposes is graduated : 5% on the first bracket and up to 10% on the fifth and highest bracket of NIS 15 million or more. A simulation conducted for an apartment costing NI 2m. shows that the recommendation quadruples the purchase tax on an investor from NIS 108,000 at present to NIS 400,000, while a person buying the same apartment for residential purposes would pay NIS 20,000.
This tax hike will cause an earthquake in the housing market, a quarter of which is composed of those purchasing housing for investment purposes, according to the most conservative estimates.