Israelis pay 75% more in house taxes

Position paper by the Jerusalem Institute for Market Studies states that real estate taxes constitute 9.5% portion of government's tax revenues against 5.4% in OECD countries. Furthermore, report ranks Israel in 121st place in efficiency in obtaining building permits

Calcalist correspondent |Published: 07.22.11 , 07:37

The housing market and dairy market woes stem from inadequate government policy rather than from market failures, says a position paper published by the Jerusalem Institute for Market Studies.

The paper surveys several markets which made headlines recently and finds that politicians and other sources tend to blame the markets for failures as a way to cover up their own shortcomings.

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For example, as regards the housing market, the JIMS found that when it comes to efficiently obtaining building permits, the World Bank rated Israel 121st; it also rated Israel 147th in efficiency in obtaining property rights after real estate acquisitions.

These procedures take four times as long as the Organisation for Economic Co-operation and Development average, claims the JIMS.

In addition, the government levies heavy real estate taxes which constitute some 9.4% of the government's total tax revenues as opposed to a 5.4% average in OECD states. This means that Israelis pay 75% more in home taxes than their OECD counterparts.

"When all government steps fail to produce a satisfactory result, there is a tendency to blame the market," says Yarden Gazit, author of the paper and research fellow at the Jerusalem Institute for Market Studies.

"However", adds Gazit, "in the case of the housing market, the failure is a government failure from A to Z".

Additionally, in regards to the dairy market, the JIMS found that it was a government policy that drove up the prices of basic products.

"The dairy market is based on the Soviet model," says Gazit, "and the Israel Dairy Board and its officials determine how much milk will be produced, by whom and for what price it will be sold to dairies. The Dairy Market Planning law bans imports and free competition."