The Ministry of Finance is planning to change purchase tax rates again to deal with the ballooning budget deficit and to support young couples seeking to buy a home. Sources inform ''Globes'' that the ministry plans to include in its economic plan for 2013-14 a two-part measure on the betterment tax: on one hand, it will reduce purchase tax for first-time homebuyers; and on the other hand, it will raise purchase tax for buyers of bigger homes and luxury homes, even if the buyers own only one home. The sources added that the ministry expects the proposal to generate NIS 1 billion revenue during the economic plan's period.
On May 5, purchase tax rates will be updated. The cap will lowered and the tax rates will be raised. In other words, until May 5, homebuyers will be exempt from purchase tax on homes costing up to NIS 1.47 million, but from May they will pay a tax rate of 3.5% of the purchase price of a first and only home costing more than NIS 1.24 million. This measure will have a clear and immediate impact on young couples.
The maximum purchase tax rate is currently 7%, on purchases of homes for investment costing NIS 3.26 million or more. On May 6, this rate will fall to 5%, and the threshold will be lowered to NIS 1.05 million.
The purchase tax rates that will come into effect in early May will not last long, and will be replaced by tax rates to support young couples. But because the budget deficit is headed for 4.5% of GDP in 2013, the Ministry of Finance will finance the measure by raising the purchase tax on people moving up-market and buying bigger homes, and on luxury homes, to generate billions of shekels in revenues.
The Ministry of Finance will again try to abolish the general betterment tax exemption granted by former Minister of Finance Yuval Steinitz in 2011-12 to investors on the sale of apartments bought for investment. The exemption was intended to lower housing prices. Former Knesset Finance Committee chairman MK Moshe Gafni (United Torah Judaism) strongly opposed the measure and blocked it in the committee. The ministry estimates that cancelling the exemption will generate NIS 200 million in revenues in the first year, and another NIS 1 billion over seven years.
Published by Globes [online], Israel business news - www.globes-online.com - on April 18, 2013
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