Finance C'tee challenges government on import tariffs, VAT

Members of the Knesset Finance Committee expressed doubt Tuesday that reduction of import tariffs on food would reduce costs to consumers. They cautioned the government against changing taxation policy without opening the matter to debate.

The Kedmi Committee presented its recommendations on reducing duties on food and agricultural products in April, although Finance Minister Yuval Steinitz is yet to formally approve them.

There have also been rumors circulating in the media that the government is planning to raise the value-added tax from 16 percent to 17% in July.

Knesset Finance Committee chairman Moshe Gafni called Tuesday for Steinitz to bring both matters to his team, although he acknowledged that Treasury officials had informed him that there were no plans to raise VAT.

Defending his decision to convene a discussion on the matter anyway, Gafni said: “We would not want to wake up one morning to find that the [finance] minister has signed new tax directives.”

MK Shai Hermesh (Kadima) called the removal of duties a “mirage,” saying it would benefit importers and large retailers rather than consumers and would harm local workers.

“Pri Galil pays $1,000 per month to Israeli factory workers, instead of paying $1 per day to Thai workers, and the end result is that the consumer pays an extra 30 agorot per can,” he said. “The price of a can of tuna will drop from NIS 5 to NIS 4.7 if duties are removed. I have no doubt that consumers are ready to pay an extra 30 agorot to ensure the continuation of local industry.”

MK Avishay Braverman (Labor) slammed the “simplistic method” of comparing local prices to foreign prices, saying that tariffs should only be removed once the finance minister has presented the full picture and the matter has been thoroughly examined.

“Over-concentration is the real problem in the Israeli economy,” he said.

“The last thing I would be doing during a time of global crisis is lowering tariffs, which in any case will not lower costs to consumers.”

MKs Ruhama Avraham-Balila (Kadima), Faina Kirschenbaum (Yisrael Beytenu), Ghaleb Majadle (Labor) and Amir Peretz (Labor) also expressed concern about the Treasury’s plans.

Treasury Budget Department representative Moshe Oren acknowledged that there was “no certainty that lowering duties will translate to reduced prices” without also introducing complementary measures.

Israel Tax Authority representative Shirly Avivi attempted to assuage the MKs’ fears, telling them the Kedmi Committee took into consideration possible damage to local industry when conducting its work and that it was scheduled to present further recommendations on the matter of concentration.

The Tax Authority supports removing tariffs on raw materials, but not at the expense of local manufacturers, she said.

Manufacturers Association of Israel director-general Amir Hayek explained his organization’s opposition to removing tariffs, accusing the government of “conduction experiments with human beings.”

Referring to Tax Authority and Industry, Trade and Labor Ministry forecasts that there would be only a minimal effect on prices, he said: “This measure will endanger tens of thousands of workers without taking into consideration how much it will impact on prices.”