Israel Needs to Hike Taxes on Rental Property

December 18, 2014 Taxation in Israel

property tax in IsraelJERUSALEM – Families in Israel will need to take on more debt to pay off their housing costs, unless the government hikes the rate of tax on rental incomes.

House prices in Israel are seeing significant increases in prices due to prohibitive red tape and under-taxation, and the upward price pressure is making it difficult for families to make ends meet, according to information in a new report issued on December 17th by the Taub Center for Social Policy Studies in Israel.

Currently it takes an average of 13 years for residential buildings to be completed in ISrael, with 2 years being spent on construction while approximately 11 years are spent on planning and obtaining licenses, and the excessive time frame is restricting the supply of housing in the country and raising prices.

In addition to the time taken to build housing, the low tax burden on rental incomes drives a large number of investors into the market, as only rental incomes exceeding ILS 5 080 per month are liable for taxation, even though the average rental price in Israel is ILS 2 500 per month.

The experts of the Taub Center for Social Policy Studies in Israel recommended that rental investment incomes be taxed more, suggesting that incomes from rental property be raised to at least 25 percent.

The high prices of housing are now driving up the average living costs faced by families to a level higher than their income, forcing households to take on more debt in order to cover their expenses.

Photo By: WKeown