טכניון מכון טכנולוגי לישראל
הטכניון מכון טכנולוגי לישראל - בית הספר ללימודי מוסמכים  
M.Sc Thesis
M.Sc StudentBenchetrit Gilat
SubjectThe Local Tax Burden on Manufacturing Industries Israel
DepartmentDepartment of Architecture and Town Planning
Supervisor Professor Daniel Czamanski


Abstract

The general Arnona is a tax imposed by the Israeli local authorities on real estate. During the eighties, government policy towards local finance had changed. Central government funding of local authorities was reduced, requiring that authorities self financing be increased. The result was a significant increase in Arnona rates, with businesses bearing most of the burden. The Arnona caused a continuous expensive conflict between the local authorities and the industrial sector. The main purpose of this research is to analyze the tax system and identify the causes of the conflict.


An evaluation of the Arnona was based on theory criteria. The data for this evaluation were obtained from various documents and a research survey of business establishments, in cooperation with the Manufacturers Association of Israel.


Analysis of the documents points to a number of essential findings: The direct cost of the Arnona is significant. There are also considerable indirect costs emerge from experts consultation, law suits and boundary conflicts between local authorities. The Arnona has an unbalanced political responsiveness. Comparison between the distribution of the Arnona in the seventies and the eighties shows that the main burden of the increasing rates fell on the business sector rather than on the residential sector which has the electoral power.


Analysis of the survey points to a number of essential findings: The main defect of the Arnona arises from the method of calculation, which is based on a fixed price per space unit. Analysis of variance between land-intensive industry and other industry branches shows that there is a significant difference in the Arnona burden they bear.


86% of the survey respondents expressed the opinion that there is a need to change the Arnona. The Arnona breaks the ability-to-pay principle. There is a significant variance in the burden of the Arnona among establishments. The Arnona breaks the benefit principle. There is no relationship between the Arnona rate charged by a local authority and the level of services provided.


The main conclusion of this research is that the disadvantages of the tax are much more substantial than its advantages. The main recommendation is to replace the Arnona with a tax corresponding to the ability-to-pay principle.