This is good news for dozens of the firm's clients, whom the firm has been representing for the issue for nearly seven years and who together share a liability for the improvement levy amounting to tens of millions of shekels
The Supreme Court ruled unanimously today, in accordance with the ruling of the Honorable Justice A. Stein, that when assessing the value of real estate "in its previous state" for the purpose of assessing the improvement tax, the contribution of TAMA 38 (by its very approval) to the values should not be ignored
The court is required to decide between the two approaches of the municipalities versus the residents' version
The municipality's approach is that when calculating the improvement wax, the increase in value that was caused by the application of TAMA 38 to the land should be ignored, so that in the "previous situation" assessment, this increase in value should be neutralized and the value of the land should be assessed in accordance with the original situation at a lower value that creates a higher tax- The neutralization approach – As a result, residents were charged tens of billions of shekels
According to the residents' approach - in calculating the improvement tax, the value of the land "in its previous state" should be included, in accordance with its value in the free market, which weighs the contribution of TAMA 38 to the market value - The inclusion approach or market-value approach – According to which the new plan is hardly generate tax revenue
In the Supreme Court's view, the correct approach – which meets the requirements of the law and is appropriate to tax law – is the market value approach
Excerpts from the ruling that summarize the decision:
"At this point, we have room to ask: Does the increase in value that originates from TAMA 38 (without the issuance of a building permit) entail a tax event of improvement that justifies neutralizing this component in the "previous situation" assessment in a way that would allow for the collection of tax in respect of it? Likewise, does the increase in value that arose following the approval of TAMA 38 meet the necessary condition of a direct causal connection to the planning action for which the tax was collected - namely the approval of the other plan? It seems to me that there can be no dispute that The answer to both of these questions is an absolute no"
"The importance of the purpose underlying the collection of the improvement tax should not be underestimated. However, this purpose, as important as it may be, should not be achieved at any cost and certainly should not exceed the limits of the law for this purpose. When the local planning body acts and invests resources in approving a plan, but, unfortunately, its efforts do not bear fruit and do not improve the taxpayer's property (beyond the improvement that has already accrued to it by virtue of the conditional rights under TAMA 38) - the local committee should not be entitled to the tax. On the contrary: it seems that the collection of the improvement tax on the improvement that has accrued in a causal relationship with TAMA 38 is the one that does not fit the purpose of the tax, since the approval of a national outline plan does not involve an investment of resources by the local committee, but by the central government, which has chosen for its own reasons not to charge tax for it"
Finally, the Supreme Court has spoken, and now it remains to be seen how the precedent will affect the hundreds of proceedings open before the Appeals Committee
It is estimated that the thousands of legal cases (over 2,000) that were awaiting a decision on the matter will be closed based on the Supreme Court ruling
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