"The early payment discount on property taxes in Haifa almost made a mockery of the Rash"

(haipo) Does the early payment discount on property taxes in Haifa really constitute an incentive for residents or is it a discount that no longer reflects economic reality? This is the question submitted by Haifa City Council members, Attorneys David Etzioni and Zeev Sonenzon, in a query and raised at the City Council meeting held last Tuesday, 1/9/26.

At the center of the query is the discount given to residents who pay the full annual property tax in advance, only 2%. The council members claim that in the current economic reality, when the Bank of Israel interest rate is 3.5%, the discount offered by the municipality does not constitute a significant economic incentive for the resident. "This is a proposal that does not constitute an incentive but almost a mockery of the state," argued Etzioni and Sonenzon.

According to them, when a resident is required to take out the money in advance and, in effect, give up the option of holding it, investing it, or benefiting from interest on a deposit, the discount received in return must be attractive enough to justify the advance payment.

Why did the discount remain 2%?

In a query, council members asked how the municipality economically justifies the discount rate, which is only 2%, when the cost of money in the economy is higher. They also asked whether the municipality is aware that when the discount on prepayment is significantly lower than the alternative interest rate that a resident can receive on his money, the incentive to pay property taxes early becomes very limited.

Another question addressed to the municipality concerned the fact that the discount had not been updated, according to their claim, in line with the significant changes that have occurred in the interest rate environment in recent years. Council members asked to examine the possibility of determining the discount rate in a way that would reflect the real economic incentive for the resident, or at least to establish a mechanism that would allow for examining and updating the discount rate in line with changing economic conditions.

According to them, this is not just an accounting issue. It is a policy that directly affects residents' pockets and the municipality's cash flow.

Then came the municipality's response: "2% is the maximum"

However, in the mayor's response to the query, it was clarified that the municipality cannot simply decide to increase the discount. According to the response, the municipal policy is based on the provisions of the law, and in accordance with Section 13 of the Regulations on Arrangements in the State Economy (General Property Tax in Local Authorities), the discount given for paying property tax in advance is limited to a maximum rate of 2%.

In other words: 2% is not a rate that the municipality chose arbitrarily, but rather the ceiling that the law allows the local authority to grant.

This means that even if the interest rate in the economy is higher, and even if from an economic perspective it can be argued that a resident may demand a higher "return" for the advance payment, the municipality is not permitted to grant a discount higher than 2%, as long as the limit set in the regulations remains in place. Thus, in fact, the query raises a broader issue. Is the mechanism set in the national regulations still appropriate for the changing economic reality or is it time to update the rules?

Meanwhile, in Haifa the answer is clear: residents can pay property taxes early and receive the maximum discount allowed by law, only 2%.