Severe postal service disruptions are expected as Israel Postal Company employees go on strike today.

There will be no mail distribution in most areas of the country, and income tax, V.A.T., National Insurance Institute payments and other bills will not be processed. Vehicle ownership transfers and HMO memberships will not be processed, and diplomatic post will not be handled.

Post office branches will close down tomorrow afternoon, and all services will be suspended for an unlimited period starting next week.

Reuven Karazi, chairman of the postal service's national workers' committee, said the workers are protesting the government's refusal to delay opening the market to competition, scheduled for July 2.

Employees are asking that the company, currently a monopoly, be allowed flexibility in setting prices - such as reducing bulk mail rates - before free competition is allowed. Otherwise, the Israel Postal Company will be uncompetitive, and this will result in either layoffs or bankruptcy, Karazi said.