Many people have asked us in the past few days how the Israeli government dared to slam the door in the faces of Diaspora Jews. Why did the government decide on a measure which is "neither Zionist nor economic" - the new austerity package which will include raising the purchase tax on homes bought by foreign residents (from 5% for the first tax bracket, even for the purchase of a first home) and the automatic levying of a tax on capital gains on the difference between the purchase and the sale of a home.
After all, the sale of homes to foreign residents is one of Israel's most successful "export" industries. Foreign currency enters the country, municipalities profit from arnona (local property tax) without the need to spend heavily on schools and kindergartens, and en route, we maintain welcome ties with the Diaspora.
Therefore, instead of complaining about thousands of ghost apartments which are occupied only during the summer and the holidays, and destroying Diaspora Jews' wish to buy a home in Israel, we should simply build more homes for both Israelis and the good Jews from around the world.
Nonetheless, with all due respect to the ethos which holds that Israel is the home of all Jews, in a best case scenario, this is sheer innocence. It is true that Diaspora Jews who buy homes in Israel will not like it that they are now all classified as foreign investors, but this is mostly semantics. After all, if you buy a home and immigrate to Israel within a reasonable time, you will be refunded the purchase tax and you will not be asked to pay the capital gains tax on a sale.
But if they are foreign buyers (at least until their children go off to college), there is nothing special in the Economic Arrangements bill. Almost every country in the world has barriers and restrictions, which are often far more draconian than higher tax rates, on the purchase of real estate by non-residents, at terms which were set long before the real estate bubble in the housing market.
For economic reasons (external demand which boosts prices, the effect on uncontrolled capital inflows, etc.), social reasons (ghost apartments, ethnic enclaves, etc.), and security reasons (purchases by hostile elements, purchases in the borderlands, etc.), policymakers prefer controlling exogenous demand for finite resources in every country in the world. Bottom line, your nation's poor (and young people) come first, before the poor of another town. Most of all, they come before the rich people of another country.
Published by Globes [online], Israel business news - www.globes-online.com - on July 29, 2013
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