Monday, November 26, 2018

Business Arnona


Dafna Shemer

As one of the remedies to the budget crisis of the Jerusalem municipality, one proposal was to reduce the amount of discounts on municipal taxes (Arnona) on businesses.

The proposal is interesting because it focuses on non-residential property tax and not, as examined in the past, on the residential Arnona. The amount of discounts on residential property tax (350 million or 27% of the initial charge) is higher than the discounts for businesses (277 million or 19%).

The discounts given to businesses are for an IDF disabled veteran, or for a business owner whose business is the only one, provided that the business cycle is less than NIS 290,200, the business owner is an elderly person (a man over 65 or a woman over 60) and the size of the business does not exceed 75 sq.m. Hence the feasibility of a discount on residential Arnona is greater than in business.

In addition to businesses, non-residential property tax includes institutions, religious institutions, municipal properties, agricultural land, banks, cinemas, industrial plants and parking lots. Among these categories, the assets recognized as "religious institutions" receive a discount of 98% of the charge, whereas municipal properties, also receive a high discount in taxes (76%), and institutions receive 58%. The Arnona charge for municipal properties constitutes 7% of the total amount charged for non-residential property tax, religious institutions constitute 1.7%, and institutions 18% of the charge. Being a large category, the discounts received by institutions constitute more than half (54%) of all non-residential discounts.

What about businesses? These constitute 33% of the non-residential properties, while their discounts constitute a mere 5% of the total non-residential exempts. However, in terms of collection there is room for improvement in the business sector, since only 75% of the amount charged is actually collected, so that even considering the discounts (at approximately 3%), another 22% of the charge are still not collected. Jerusalem as a metropolitan city is a commercial and employment center for the surrounding communities, and the potential for raising taxes for such types of assets is high, but deepening the collection may be more important in this case.

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