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Prime Minister Benjamin Netanyahu has backed down from a plan to impose a Value Added Tax on fruits and vegetables, finance ministry officials said Monday.

The cancellation of the tax leaves a hole of NIS 1.8 billion in the state budget, meaning the government will need to find a new source of revenue by July 15.

According to the plan, the VAT was to increase in three stages, eventually reaching a rate of 15.5 percent two years from now. It was to be imposed on fruits, vegetables and tourism-related products.

Netanyahu had been instructing the treasury to push hard for the tax, in light of strong opposition from the ultra-Orthodox Shas party, a partner in the government coalition.

Shas Chairman Eli Yishai had said that imposing a VAT on fruits and vegetables would constitute a violation of a government agreement not to harm the weaker sectors of society.