Before raising municipal taxes, authorities must prove they have become more efficient

Meet the municipal tax (Arnona) triangle in Israel: the tax we pay at home, the tax we pay through businesses, and the extraordinary increases added on top of everything. According to OECD data, business Arnona in Israel is about 40% higher than is customary in other countries. As it continues to rise, businesses are forced to incorporate these costs into the prices of products and services. Thus, the same family pays once in the Arnona bill and a second time at the checkout in the supermarket, restaurant, or store.

Above this, there is a mechanism for extraordinary requests, which allows local authorities to ask for additional increases beyond the price hike already guaranteed to them. Even before the Ministry of Interior decides which requests to approve, everyone's Arnona is expected to rise by 3.05% in 2027 due to an automatic update. On top of this, local authorities are asking for extraordinary increases of 4%, 5%, 10%, and even more.

Before approving even one shekel, a basic question must be asked: what did the authority do to become more efficient before asking for more money from the public? Did it reduce expenses? Improve processes? Re-examine contracts? Raising Arnona is not a work plan. The problem is that the public does not even know the rules of the game. The Ministry of Interior did not publish the guidelines for examining the extraordinary requests for 2027 on time, while the authorities have already submitted their requests. As long as the criteria are not transparent, there is more hidden than revealed.

With general elections approaching, there is a growing fear that political considerations will outweigh the demand for efficiency and responsible budget management. The public and business owners should not finance this politics. It is worth remembering that Arnona for businesses is not just a problem for owners; it is part of the cost of living. Every additional increase is added to wages, electricity, and rent, eventually reaching the final price for the consumer.

Finally, the autopilot mechanism—commonly called the "automatic pickpocket" in the business sector—must be addressed. When public sector wages rise, the autopilot kicks in and the Arnona rises with it. This is an economic distortion of the first degree. It is time to change the mechanism. An authority that wants to collect more from the public must first prove it has done everything in its power to become more efficient. A government that wants to fight the cost of living must start where it has control. First, become more efficient, then ask for more from the public.

Shahar Turgeman is the President of the Federation of Israeli Chambers of Commerce.