Why Is Jerusalem Municipality Targets UN & Churches for Taxes?

The Jerusalem Municipality has declared its intention to start collecting municipal taxes (called “arnona”) on 887 properties belonging to various churches and UN institutions in Jerusalem. This move, initiated by Jerusalem Mayor Barkat, is a major deviation from  long standing government and municipality policies regarding taxation.

To understand what is happening here requires first understanding that there are few areas in Israeli law that are so confusing, contradictory and inconsistently applied as laws governing treatment of such properties. The reasons for this are threefold.

  • First, such properties in (Israeli-annexed) East Jerusalem are treated differently from similar properties inside the Green Line, in part based on specific agreements, concessions or customs that in some cases date back to the Ottoman era, and in part based on the fact that East Jerusalem, in the eyes of the international community and international law, is occupied territory.
  • Second, within East Jerusalem, different churches and church properties receive different treatment. The issue of taxation of Catholic church properties, for example, has figured prominently in formal negotiations between Israel and the Holy See, and this issue has been one of the stumbling blocks preventing an agreement.
  • Third, it must be emphasized that only a minority of church-owned properties in East Jerusalem are places of worship or holy sites. Others are shops, apartments, seminaries, hospitals, etc. — and each of these properties is often treated differently from other properties owned by the same church.

Until now, Israel and the Jerusalem Municipality have extended tax exemptions – or large tax discounts – to most church-owned properties, usually settling the matter on an ad hoc basis. Only rarely has Israel allowed the matter of taxes to become an adversarial dispute with the various churches. Both the Government and the Municipality, recognizing that such disputes would have a highly detrimental impact on Israel’s relationship with Christendom and undermine Israel’s claims of respecting Christianity’s status in Jerusalem, have until now acted with great restraint, and never coercively.

In this context, it is fair to characterize Barkat’s coercive move to impose taxes against the churches as unprecedented.

As part of the new decision, the Municipality has already started freezing bank accounts belonging to the Anglican, Armenian, Greek Orthodox and Catholic churches, in order to claim what it considers taxes it is due, amounting to 650 million shekels (around $185 million). It has justified this extraordinary moved based on the legal opinion, commissioned by the Municipality, furnished by an Israeli expert on international law, Prof. Gabriel Hallevy.

Based on Hallevy’s opinion, the decision to tax church properties applies to those properties that are not used as places of worship. Taken at face value, this new policy suggests that if in the past Israel viewed the material well being of Jerusalem’s churches as a vital Israeli interest, the same view no longer holds sway. Indeed, this new tax policy, if it is not changed, will severely undermine the viability of many of the Christian communities in the city. Many of these are vulnerable communities, struggling to maintain the Christian presence in Jerusalem under daunting circumstances.

That being said, it is not clear that Barkat’s decision to deviate from past norms in the treatment of churches should be taken at face value, and it seems likely that other motives are in play.

Firstly, the move to suddenly start taxing church properties appears to be part of Jerusalem Mayor Nir Barkat’s attempt to exert pressure on the government, and more specifically on the Ministry of Finance, with which Barkat has been in an open dispute over state funding to the city. Earlier this month the Municipality reportedly stated: “If the state does not allow us to collect the taxes for the benefit of Jerusalem’s residents, we will not hesitate to appeal to the High Court of Justice.” The statement went on: “Alternatively, if the state is interested in the continuation of the current situation, we demand that the state provide full indemnity for these amounts. Either way, we will no longer agree to Jerusalem residents paying this amount.” Assuming that the Netanyahu government remains attentive to the churches — and recognizes the potential costs for Israel that will be involved in an ongoing tax dispute with them — Barkat is likely using the threat against the churches as leverage in this battle to obtain additional state funding.

Secondly. Barkat’s defiant mood is also likely linked to his desire to attract larger support for himself, personally, within the Likud party. Like all Israeli politicians, Barkat knows that taking hardline, aggressive stances on issues related to Jerusalem has traditionally been a surefire way to gain popularity among the Israeli right-wing. Importantly: Following that same logic, the Netanyahu government could well be tempted to adopt/support Barkat’s aggressive stance towards churches (and the UN – always a tempting target) in Jerusalem; the only thing mitigating against such an outcome would be if Netanyahu were convinced that the potential damage a confrontation with the Churches could cause, either politically/diplomatically for Israel or to Jerusalem’s stability, outweighed the expected domestic political gains.

Finally it is possible that the threat of taxation is being used as leverage in an attempt to get the Greek Orthodox Church to both rescind its sale of lands in West Jerusalem to developers, and to acknowledge the validity of the sale of Church properties in the Old City to the Ateret Cohanim settlers.

Whether Barkat’s move is really about taxation, or whether the Churches are being used as pawns in a larger game, is as yet not clear. What is clear is that Barkat is more than willing to act to the detriment of the Churches in ways never seen before, if it suits his purposes.

Hence, it is clear that the Municipality’s decision has not only local ramifications, but national ones too, and that Netanyahu will not be able to avoid acting on the issue. At the same time, this development further adds to the overall suspicion that political forces in Israel, reinforced by the Trump Administration’s shift in Jerusalem policy, are determined to aggressively impose untrammeled Israeli sovereignty and hegemony over all parts of Jerusalem, while further denying or diluting the rights of others in the city, in violation of the existing status quo