BICOM

The Chief Economist at Israel’s Finance Ministry resigned yesterday, explaining that he does not want to be associated with Finance Minister Yair Lapid’s plans to exempt some first-time buyers from value added tax (VAT).

In a letter which Michael Sarel made public, he said “The finance minister’s proposal is faulty in my view in almost every possible way and will almost certainly not reduce home prices, as is its declared goal.” However, he did praise Lapid for his “economic policy leadership that until now had been excellent both on a macro and micro level.” Lapid issued a terse statement in response, thanking Sarel for his service and expressing regret over his resignation.

It was widely reported on Tuesday that Lapid plans to cancel the 18 per cent VAT for couples buying a home for the first time, so long as they have children and at least one parent has served in the IDF or completed civilian national service. Sarel said that such a move would increase demand and lead to a probable price hike, while the unpaid VAT would need to be compensated by alternative taxes. However, Lapid’s Yesh Atid party view the young middle-class as an important constituency and the cost of housing a major issue for them.

Two additional legislative initiatives also caused controversy yesterday. The Knesset’s Constitution, Law and Justice Committee approved a bill which would allow local rabbis to oversee conversions to Judaism in Israel, breaking the monopoly of Israel’s Chief Rabbis over the issue. The bill, proposed by Hatnuah MK Elazar Stern is supported by a variety of parties. However, it is vehemently opposed by Jewish Home.

Meanwhile, MKs from a number of parties proposed a bill which would ban daily newspapers from being distributed for free. Proponents of the draft legislation say it is designed to “strengthen written journalism in Israel” but is widely perceived to singularly target Israel Hayom, which has an editorial line strongly supportive of Prime Minister Benjamin Netanyahu.