Benjamin Netanyahu
Photo: AP
Netanyahu nixes produce VAT
Prime minister annuls Treasury's decision to impose valued added tax on fruit, vegetable sales. 'My job is to listen to the public and I've decided that this is not the time for a new tax," he says
Prime Minister Benjamin Netanyahu announced Monday that the government will not impose a value added tax on produce sales.
The controversial plan to impose VAT to fruit and vegetable sales as part of the government's new financial plan was contested from the very beginning; with Agriculture Minister Shalom Simhon warning that the move would create a 20-year setback for Israel's produce market.
Taxes
Yehudit Yahav
Value added tax to rise by 1% from 15.5% to 16.5%; price of most products expected to increase accordingly within days
In a joint statement with Finance Minister Yuval Steinitz, the prime minister said that the deficit caused by the decision would be resolved by not implementing the reduction rates planned for private and corporate income taxes.
"Part of my job is to listen to the public, said Netanyahu, "And I've come to the conclusion that this is not the time for a new VAT and this is my decision."
Steinitz told Ynet that "there have been several discussions on the matter between the prime minister and myself, but unfortunately I was unable to convince him. I respect his decision and will work accordingly.
"In my humble opinion, VAT should be applies equally to all product and the absence of produce VAT is an omission that should have been corrected. Nevertheless, we agreed the deficit limits will not be breached."
When asked whether the decision was the result of the pressure put on the Likud by the coalition members, namely the Labor and Shas parties, which fireclay opposed the decision, Steinitz said that "we are not a government you can pressure. The prime minister made this decision out of consideration to the public."
Earlier Monday, a source in the Prime Minister's Office said Netanyahu and Steinitz agreed to defer the produce VAT and when the time comes – to implement it in three phases, each calling for a 5.5% tax over three years, until the produce VAT would reach 16.5% - the same as generic value added tax.
To make up for difference, the reduction rate of private and corporate income taxes would decrease from 2% to 1% per-annum, making the cost of tax reduction, which was supposed to be NIS 4 billion a year, NIS 2 billion a year.
Roni Sofer, Tani Goldstein and Zvi Lavi contributed to this report
