Israel Tax Authority Chief Referred to Reduction Due on Purchase Tax on Investment Properties

Israel Tax Authority head Shai Ahronovitch is warning of billions in damage to state revenues, pointing to money “left on the floor” in the rental market, attacking budgetary priorities, and revealing dramatic steps ahead — including action against bodies that support draft evaders and a continued battle against black-market capital, even under personal threats.

Speaking at the the industry-leading Nadlan Center Conference in Eilat, Ahronovitch clarified that reducing purchase tax on second-home acquisitions is primarily a policy tool, not a fiscal one: “Purchase tax on investment apartments is a housing policy matter, not a fiscal matter. Broadly speaking, if you lower it, there will be more transactions, and we will see more tax revenue.” He noted that from January 1, 2027, the tax on additional apartments is expected to return to 5% unless a different decision is made.

[Buyitinisrael’s Note on this article: The elevated purchase tax rates of 8% to 10%, generally applied to foreign buyers, are set under a temporary order that expires automatically on January 1, 2027. If no extension or new legislation is passed, the rate is expected to drop to 5%. It is worth noting that at the end of 2024, the temporary order was extended just days before it was due to expire, creating significant uncertainty, a market standstill, and delayed transactions. Buyers are advised to consult with a qualified real estate attorney or tax advisor before making any decisions based on this information.]

Ahronovitch did not conceal his concern over the impact on state revenues: “There is a very significant decline in real estate tax collection, and it worries me greatly. The indirect damage to the Israel Tax Authority from purchase tax as a result of Operation ‘Lion’s Roar’ has reached 7 billion shekels.” He added that the drop in collection is already clearly visible, with “a 31% decline in April 2026 compared to April 2025.”

At the same time, he pointed to unrealized collection potential in the rental market: “We estimate that because we are not collecting enough tax on rental income, we are missing out on more than one billion shekels in taxes.” Nevertheless, he noted, “the legislators in this country are less fond of taxing rentals,” even though the professional echelon’s position is that “it is better to collect more from rentals and reduce purchase tax.”

One of the prominent measures on the table is the reinstatement of property tax on vacant land: “This is a matter of political timing and fiscal need, and we will act to bring it back. Property tax on vacant land will return in the next budget.” He described it as a tool that can increase revenues and encourage land utilization.

Ahronovitch also addressed the broader budgetary pressures: “There were taxes that the Finance Minister sought to pass to address the deficit, but the government preferred to increase the defense budget.” He noted that difficult steps were taken, such as “the trapped profits law and the freezing of tax brackets,” but stressed that “we are still in a high-tax environment.”

On the enforcement front, he described an ongoing battle against black-market capital: “Israel Tax Authority employees are making every effort to bring money in from the dark corners of the Israeli economy. Our employees and I personally receive death threats.” Despite those threats, he said, “we are responsible for the state treasury and we are not afraid to do our job.”

Another issue on the agenda is action against institutions that support military service evaders. Ahronovitch noted that “pursuant to the Attorney General’s directive, we intend to act against institutions that support draft evaders — and they will not be recognized for tax benefit purposes.” He described a broad review of thousands of organizations: “There are more than 12,000 bodies under Section 46 and we need to check who supports draft evaders and who does not.”

Looking ahead, the Israel Tax Authority is already working on additional reforms, including mandatory rental reporting and the rollout of an online VAT system: “We are doing intensive work to prepare a new package for the next government… we want to tie collection to the execution of the transaction.” He also noted that a reassessment of income-producing real estate taxation is being considered as part of the trapped profits issue.