MKs: VAT on fruits, vegetables is rotten

Finance Committee members are unanimous in their opposition to the proposal to tax fruits and vegetables.

organic vegetables 88 (photo credit: )
organic vegetables 88
(photo credit: )
The government's proposal to levy a value added tax on fruits and vegetables will not receive Knesset approval, Knesset Finance Committee chairman Moshe Gafni (United Torah Judaism) said Tuesday. The Finance Ministry should find alternative budget solutions, he said. "The VAT levy on fruits and vegetables will not be passed by the committee," Gafni said during a committee session. "The Knesset Finance Committee will take an active role in seeking budgetary alternatives for the Finance Ministry." Finance Committee members were unanimous in their opposition to the proposal to tax fruits and vegetables, which was passed by the cabinet earlier this month as part of the 2009-2010 budget plan. Finance Ministry Deputy Budget Director Raviv Sovel told the committee there was no reason to exempt fruits and vegetables from VAT. Other basic consumer items that the poorer segments of the population depend on, such as bread, are not exempted, he said. The VAT levy on fruits and vegetables is expected to generate NIS 1.8 billion a year for the government's coffers, according to the Finance Ministry. "The budget-package deal includes measures to increase taxes [VAT levy on fruits and vegetables, 1 percent increase in the VAT rate, raising VAT on cigarettes and alcohol], which are juxtaposed with measures to raise [National Insurance Institute] child allotments that will increase the monthly income of low-income families by an average of NIS 120, while the VAT levied on fruits and vegetables would add NIS 24 to the monthly expenses of low-income groups," Sovel said. MK Haim Oron (Meretz) said linking child allotments to VAT on fruits and vegetables was not relevant since the increase in child allotments was to compensate for their being cut over recent years. "There is no chance that the VAT levy on fruits and vegetables will pass," he said. Owners and vendors from open-air markets around the country demonstrated in front of the Knesset Tuesday morning to protest the government's intention to levy VAT on fruits and vegetables. The planned tax on fruits and vegetables would pass in the Knesset, Finance Minister Yuval Steinitz (Likud) said Tuesday, adding that the ministry did not have any alternatives. Agriculture Minister Shalom Simhon (Labor) on Tuesday called upon Labor Party chairman Ehud Barak to declare that Labor will oppose the VAT levy on fruits and vegetables. "The VAT imposition on fruits and vegetables is a disaster for the weaker segments of the population and farmers," he said. "It is unfortunate that the finance minister has chosen to hurt the less well-off and farmers, who are struggling to survive especially in the Negev and the Galilee, instead of postponing the tax-cutting plan by two years." Businesses and farmers warned last week that the proposed tax on fruits and vegetables would encourage more activity in the black market, lower demand, make the produce more expensive and hurt the poor.