In 2002, something happened, and major legislation was passed, which brought about a comprehensive and very significant reform in the field of property taxes. As part of this reform, a provision was made for the first time requiring a local authority to impose municipal taxes in its jurisdiction in a minimal amount. This reform was enacted against the backdrop of a severe crisis that befell the local authorities, and led some of them to a difficult situation to the point of economic collapse.
According to the new Arnona Law, the local authority was obligated to impose municipal taxes within its boundaries in a minimum amount of ILS 49.99 per square meter in relation to areas that fall under the category of offices, services and commerce.
These circumstances, of a substantial and comprehensive reform of property tax laws, and the creation of a tariff scale, which includes minimum amounts to be collected from a resident of the local authority, significantly increased the gap that existed between the arnona taxation regime that is binding by law, and the contractual property tax regime, as indicated by the settlement agreement, which was concluded seven years earlier. A striking anachronism was created between the rates charged by the company under the agreement, which, as of 2001, stood at ILS 10.17 per square meter, and the minimum amounts of property taxes of ILS 49.99 per square meter according to the new law in respect of land with the same classification. This raised a red flag regarding the degree of public justification for the continued existence of the contractual arrangement for collecting tariffs from the company, which are almost five times lower than the minimum rates according to the law. In the circumstances that have arisen, in light of the reform that has taken place in the basic concept of collecting municipal taxes in the local authorities, adherence to the contractual arrangement with the company with regard to the area of the buildings in the complex has become an administrative act that is extremely difficult to reconcile and satisfy with what is accepted and binding by law in the general municipal property tax system in the local authorities.