Kahlon announces NIS 800 million in tax reductions on consumer goods
Finance Minister Kahlon announces NIS 800 million in sales, import taxes to be abolished on variety of consumer goods; sales tax cut immediate, import tax cut pending public hearing; sales tax cut will apply to home electronics, import tax cut to appliances, lighting fixtures, cosmetics, textiles, toys.
Finance Minister Moshe Kahlon held a special press conference Monday morning to announce his "Net Reductions" plan to abolish NIS 800 million worth of sales and import taxes.
The press conference was convened on short notice, while Prime Minister Benjamin Netanyahu was still on his visit to Europe. Kahlon nevertheless claimed "the prime minister was abreast on matters, and we're following government policy. The plan to lower import taxes and generally reduce taxes is a direct continuation of government policy."
Sales taxes levied on purchasing various electrical appliances will be abolished as part of the plan, as would customs payments on toys, home appliances, cosmetics, clothing and textiles and lighting fixtures. The Ministry of Finance alleged cutting these taxes was expected to save hundreds of shekels annually per family.
The ministry further explained that in order to ensure the savings will reach consumers and not stop at importers, the taxes will be canceled with a temporary order valid within a few days' time from the order's publication in the records and until the end of 2018. The import tax, meanwhile, will be canceled after a public hearing process to take place in a month.
The minister said in the conference his reform "affects the pocket of every Israeli citizen, while not harming Israeli industry. We will not lower prices and bring about layoffs. Public hearings will take place in collaboration with Israeli industry."
"We were asked to handicap online shopping and refused, but we did see some 500,000 small businesses that are in fact adversely affected by it. Customs taxes will be lowered to zero on most consumer products. We have to carry out some brave moves, or else the status quo will remain," Kahlon said.
Kahlon said the middle class has shouldered the lion's share of economic burden for the past two decades. "After more and more edicts and taxes and levies, we're bucking the trend while keeping budgetary framework and responsibility," the finance minister vowed.
Finance Ministry Director General Shai Babad also spoke in the press conference, saying it was time to lower Israeli cost of living. Babad did note, however, that corporate tax will remain at present levels, pending the expected American tax reform.
The plan's components
Abolishing sales taxes
The "Net Reductions" plan includes abolishing sales taxes on electronics worth NIS 245 million annually. Between 10 and 30 percent sales taxes are currently levied on electronic consumer goods and the plan is expected to abolish them on the purchase of televisions, speakers, displays, amplifiers and more.
Abolishing import taxes
The plan also includes abolishing import taxes worth NIS 568 million annually on the following items:
1. Electric appliances – import reductions of NIS 60 annually on refrigerators, heaters, electric ovens, food processors and more.
2. Lighting fixtures – import reductions of NIS 61 annually on chandleries, lighting fixtures and lamps.
3. Cosmetics - import reductions of NIS 11 annually on makeup products, manicure and pedicure items, hair products, soaps and wet wipes, deodorants and more.
4. Textiles – import reductions of NIS 400 annually on all clothing items.
5. Toys – import reductions of NIS 36.2 annually video games, sports equipment, home and children's swimming pools, party items, board games, swings, card games and more.
The Finance Ministry has yet to decide how to use the 2017 tax collection surplus, save for its decision to reduce taxes of people making more than NIS 11,000 a month. The ministry has already explained, however, the surplus may be used for one-time taxes breaks, as opposed to budgetary long-term breaks.
Last week Kahlon abolished import taxes on baby products and contact lenses and glasses, as part of his "Net Family" plan, announced earlier this year. The state is expected to lose NIS 48.4 million in taxes as a result.