'VAT cut not seen in 50% of chains'

According to the surveyed chains, Supersol and Home Center did not reduce their prices, while Ikea, Shekem Electric and Superpharm, among others, had lowered their prices.

July 4, 2006 09:26
1 minute read.
tax cuts 88

tax cuts 88. (photo credit: )


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Despite expectations, lowering value-added tax by a full percentage point has not led to lower prices that have benefited the end consumer - at least not at half the country's retail chains. "Our survey of the main consumption chains conducted on Sunday showed that 50 percent did not modify prices following the VAT cut, which came into effect on July 1," attorney Yoram Levinson of the Consumer Protection Authority at the Histadrut told The Jerusalem Post. "What this means is that, in many cases, the end consumer is not the beneficiary of the 1 percentage point VAT cut, but suppliers, merchants and private shop and chain owners are." According to the surveyed chains, Supersol and Home Center did not reduce their prices, while Ikea, Shekem Electric and Superpharm, among others, had lowered their prices. "Where the consumer will feel a 1 percentage point cut in prices will be for purchases of big items such as cars or houses," said Levinson. Shraga Brosh, president of the Manufacturers' Association of Israel, last week suggested that a "large proportion" of the VAT cut might not trickle down to consumers, citing an internal Manufacturers Association study that concluded that only about one-fifth of the benefit achieved from lowering VAT would reach the poorer three-tenths of the population. The Israel Tax Authority said in response to questions from The Post, that prices of consumption and services goods were, over time, expected to come down by between 0.5% and 0.8% "However, the government does not have the power to intervene in the pricing of goods by the seller, which are not inspected or regulated," said the Israel Tax Authority. "The decision to buy the goods at the demanded price or to turn to a different supplier, who lowered prices lies with the consumer." Inspected consumption and services goods include teaching books, dairy products, bread, electricity and gasoline. The Industry, Trade and Labor Ministry said bread prices would drop by 5 agorot and the price of salt would be cut 5 agorot per kg. from Monday, this week.

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