An interministerial team has published an interim report recommending a change to when betterment tax is charged in plans where building rights are still uncertain. These are recommendations, not a legislative change that has already taken effect.
Betterment tax is a mandatory payment to the local authority imposed on a property owner following approval of a plan, a planning variance or permission for nonconforming use that increases the value of the land or property. The revenue is used, among other things, to develop infrastructure and public buildings and to acquire land for public purposes.
The team points to several problems with the existing mechanism: the amount of the tax is difficult to predict in advance, appraisers’ assessments can vary significantly, appeal procedures are lengthy, and there are major disparities in revenue between local authorities.
The team was established in February 2023 and is headed by Carmit Yulis, Deputy Attorney General for Civil Law, and Israel Uzan, Director General of the Ministry of Interior.
Immediate Measures Proposed in the Report
- Conditional rights and non-specific plans – postpone the tax event until an actual building permit decision is made, in order to reduce speculative appraisals.
- Binding timelines – establish deadlines for every stage of the appraisal process, from the local planning committee through the deciding appraiser, along with default arrangements and incentives for completing the process on time.
- Urban renewal – establish a structured appraisal framework for sales of apartments in condominium buildings after a plan is approved, with the aim of easing the process for private apartment owners and reducing disputes.
- Permanent legal-appraisal forum – establish a professional body to issue opinions on matters of principle and reduce appeals, objections and prolonged legal proceedings.
Options to Be Examined for the Long Term
- Examine uniform rates by area, integration of the charge into capital gains tax, or a one-time sales tax.
- Examine excluding property sales from the realization event, so collection would be postponed until a building permit is issued or actual use begins.
- Examine early appraisal tools, including appraisal schedules, allocation and balancing tables, and the use of Standard 21 in urban renewal plans.
- Strengthen appraisers’ independence through a government pool or rotation system, publish appraisals and promote uniform standards.
- Examine a national fund that would reduce fiscal disparities in the distribution of revenue among local authorities.
If the recommendations are adopted, they will apply to all local planning committees, including Tel Aviv-Yafo. For property owners and developers, the main change would be a shift from charges that are sometimes based on uncertain rights to charges imposed closer to the actual realization of construction rights.
