Israel's Property and Business Tax Faces Threat of Sharp Increase

121 Israeli municipalities have asked the Interior Ministry to allow an extraordinary increase in the municipal tax (arnona) for 2027, exceeding the standard indexation of 3.05%. Nazareth requested a 30% rise, which, with indexation, would total 33.5%. Ashkelon and Kfar Vradim requested a decrease. The business sector criticizes the initiative.

In Israel, 121 local authorities have applied to the Interior Ministry for permission to raise the municipal tax—arnona—for 2027 beyond the standard automatic indexation of 3.05% applied annually nationwide. In some cases, the requested increases far exceed the usual yearly adjustment. The applications are divided into categories: increases for all properties, only residential, or only commercial. The largest request came from Nazareth, seeking a 30% overall rate hike, which, with mandatory indexation, would total 33.5%. In contrast, Ashkelon—the only major city—asked for a 3.05% reduction, as did the local council of Kfar Vradim. Other municipalities requesting increases for all properties include Ashdod, Misgav, Gan Yavne, Tamra, Kiryat Tivon, Kafr Qasim, Ariel, Ar'ara, Reineh, Lev HaSharon, Hevel Lakhish, Kiryat Arba, Tuba-Zangaria, Binyamina-Givat Ada, and Kadima-Tzoran. Herzliya, Rehovot, Ness Ziona, Tayibe, the Gilboa Regional Council, and Yokneam applied for residential-only increases. For business, Ramat Gan, Emek Hefer, Yokneam, Azor, Hevel Modi'in, and Ramat Yishai demand higher commercial rates, while Or Yehuda proposed a decrease. The Interior Ministry will make final decisions on each request. Changes won't take effect until review is complete, but residents and entrepreneurs are advised to monitor the situation, as the difference from standard indexation could amount to thousands of shekels annually in some cities. The initiative has drawn harsh criticism from the business community. Shachar Turgeman, president of the Federation of Chambers of Commerce, said entrepreneurs should not become a backup wallet for local authorities, and municipalities should focus on cost optimization rather than constantly increasing the tax burden.