Public health experts were outraged by news reports Thursday that the Treasury intends to put the 15.5 percent Value Added Tax on fruits and vegetables so as to lower the purchase taxes charged on apartments.
Health Ministry associate director-general Dr. Boaz Lev said charging VAT on fresh produce was "a very bad idea" and that they would meet to decide what to do about it.
Public health advocates noted that the government should be encouraging people of all socioeconomic groups to consume more fresh produce as it is beneficial to health.
"This is a reckless step," declared Hadassah University Medical Center nutrition expert Prof. Elliot Berry. "The Treasury should be lowering the cost of produce, not raising it. Charging VAT on fruits and vegetables and making them more expensive will be very counterproductive, as in the long term it will lead to more disease, obesity, heart disease, cancer and other disorders."
Berry noted that the poor already eat too much cheap "junk food" chock full of sugar and white flour and have little money for more expensive vegetables, fruit, fish and whole-grain bread. "The government subsidizes white bread, which is cheap, but whole-grain bread that is much more healthful is much more expensive," Berry said.
The health gap between the rich and the poor will widen, added Prof. Shmuel Shapira, dean of the Hebrew University-Hadassah School of Public Health and Community Medicine and deputy director-general of the Hadassah Medical Organization.
"With fruits and vegetables costing 15.5% more, the social gap will widen. Such a decision would be disgraceful, a national scandal."
Shapira declared that a wide variety of fruits and vegetables are vital to a healthy diet. Poor nutrition and improper lifestyle are a major cause of chronic disease, which costs a great deal to treat. "It's a shame that the Treasury does not give high priority to health promotion. We want the public to be aware of that, and public health advocates to press the government not to tax produce."
According to press reports, Treasury officials who floated the VAT-on-produce trial balloon, which has been raised several times before, said it would bring in more than NIS 1 billion in state revenues, and that if they could lower purchase taxes on apartments, it would wake up the housing market and increase the number of construction jobs.
According to Joshua Portman, a Jerusalem based real estate lawyer, purchase tax on real estate currently stands at 3.5% up to the first NIS 744,000, and 5% for everything above that, while first time buyers have been granted a temporary reduction of real estate purchase tax, paying no taxes on the first NIS 600,000, 3.5% on the next NIS 144,000 and 5% on everything above NIS 744,000. "Maybe this plan is looking to change the temporary reduction into a permanent one," he said.
"The government's real estate tax breaks, if they are significant enough, will most affect those buyers who are tied to a budget," Portman explained. "The state won't reduce taxes on purchases of million dollar homes, but we might see a jump in the number of young couples purchasing apartments as they want to take advantage of the savings."
Meanwhile, Hanan Schlesinger, CEO of Anglo-Saxon real estate, said he had no idea about what the government was planning, and could not know what kind of affect the plan would have, but he expects the market to slow down until the new tax breaks take effect.
"Buyers are going to wait until the official announcement is made to see how much they can save," he said.
The Regional Director of the real estate company REMAX, Bernard Ruskin, noted that while he subscribes to any plan that includes tax reductions to encourage growth, he said this plan would not succeed on its own, but only if it were the first step in a series of moves that significantly reduce taxes.
"There have been rumblings about this plan for a few days and I never thought it would go through, but it could have a positive affect on the market." He added, however, that "increasing VAT on fruits and vegetables is the wrong move. VAT has become a joke in this country and it seriously has damaged the real estate business, as we have to compete with agents who are taking money under the table from customers looking to avoid paying VAT. Do you think shop owners in Mahane Yehuda are going to be charging VAT on their produce?" he asked.
Fruits and vegetables have always had a VAT exemption, and only if they are cut with a knife or otherwise served in a restaurant is VAT now charged on fresh produce. Collecting the tax from vendors in the markets is very difficult as retailers could raise prices by 15.5% and then pocket the tax.
Finance Ministry spokesman Eli Yosef told The Jerusalem Post he had no idea about any such plans and was not sure where and how the rumors started.