From the general to the individual
- Like my colleague, and for his reasons, I too am of the opinion that the claims of infringement of the constitutional rights to equality and freedom of occupation should be rejected. At the same time, and in light of my position on the issue of the infringement of tax laws on the constitutional right to property - I am of the opinion that in this case it is necessary to examine the law that is the subject of the petition in the framework of the second stage of the constitutional examination - as my colleague did in the examination of the excess of necessity. I concur with my colleague's position that the said law meets the tests of the limitation clause, and therefore it violates the constitutional right to property lawfully. Nevertheless, I would like to expand a little with regard to the Petitioner's argument in the second petition (High Court of Justice 6251-11-25) [Nevo], which is mainly aimed at the second test of proportionality - the test of the means that is less harmful.
- In the second petition, the Petitioner raised concrete arguments regarding the effect of the amendment on her, according to which the law "catches" her even though she is not one of the wallet companies with which the law is intended to compete. This is without any mechanism in which her individual case can be examined and deviated from the provisions of the law that is the subject of the petition accordingly.
This argument of the Petitioner is prima facie eye-catching - since it is highly doubtful whether companies such as the Petitioner, whose business activity is the construction of rental properties, are the companies from which the legislature sought to collect tax in the framework of the amendment to the Law. Moreover, it was prima facie possible to solve the problem posed by the Petitioner by establishing an "escape clause" through which a framework would be created for those companies that believe that the amendment to the Law is not intended to apply to them, to raise their claims in this regard. It was possible, for example, to establish an exceptions committee that was authorized to discuss the claims of companies such as the Petitioner; Or to establish a similar mechanism that will lead to the resolution of those exceptional cases.
- However, notwithstanding the aforesaid, I do not believe that there is room to accept this argument of the Petitioner. The respondents showed that the legislature was aware of cases such as the Petitioner's case, and deliberately chose not to exclude companies like it from the provisions of the Law, due to the existence of a defined purpose. The respondents clarified that the legislature did not take the path proposed by the Second Petitioner, inter alia, due to the difficulty in classifying income relating to investments in the field of real estate and in distinguishing between passive income and income that is the result of real activity (whereas, according to the Petitioner, such are its incomes); And because usually a significant part of the profits deriving from real estate is the result of the value of the real estate itself and not of the activities that accompany its operation. They also noted the concern that if income-producing real estate were excluded from the law's application, many investments would be diverted to this field.
The respondents added that at the basis of the decision to design the legal arrangement as it was designed, there are considerations that concern the reasons for regulatory clarity and simplicity, and the prevention of disputes regarding the question of whether or not the income derived from real estate is of a business nature - in a manner that, in their view, will prevent, in their view, uncertainty and operational difficulties in tax collection.
- It should be noted that the test of the least harmful means does not require the choice of the means whose harm is the least - if this measure does not have the power to realize the purpose of the law to a similar extent to that of the means chosen in the law (see: the Chabano case, at paragraph 66 of the opinion of President Hayut; Civil Appeal 993/19 Anonymous v. State of Israel - Ministry of Defense, para. 108 [Nevo] (July 5, 2022); High Court of Justice 5934/16 Aloni v. State of Israel - Ministry of Defense, para. 52 [Nevo] (January 23, 2018)). In light of the aforesaid, in our case, it is not possible to determine that the establishment of an exceptions mechanism (or any other mechanism) would have fulfilled the purpose of the law to a similar extent, and did not undermine the desire to prevent cumbersome tax collection. In any event, and as I noted above, I am of the opinion that the burden of persuasion that the law is proportionate when it comes to tax laws is light, and therefore the scope of proportionality given to the legislature is broad.
| Ruth Ronen |