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Sakal Duty Free will see a reduction in the license fees it pays to operate its stores at Ben-Gurion International Airport following the Finance Minister's decision last week to cut a swathe of purchase taxes and customs. Sakal's contract to operate the electrical goods stores at the airport has a clause that adjusts the license fees in line with the level of taxes.

In December 2003, Sakal won a tender to run the electrical-goods duty-free stores, both the current store and the store at the soon-to-be-opened terminal (known as the Ben-Gurion 2000 project, named for the original date of completion). Sakal beat other rivals, including Shekem Electric, by offering to pay a license fee of $11.77 million a year. Sakal's bid was $600,000 higher than Shekem's. The license to run the store in the new terminal is for six years, with an option to extend for a further three.

Sources close to the Sakal group said the company would not have been interested in the tender if the contract had not included a tax-related clause. Sakal apparently learned through experience, as it had had to accept high license fees in its previous contract, even though customs and purchase taxes were similarly reduced in August 2000. The source added that no one in the company had expected there to be cuts in the taxes so soon after signing the contract. Indeed, the treasury had taken many by surprise when Finance Minister Benjamin Netanyahu made the cuts public at a press conference last Wednesday afternoon.

Solly Sakal, CEO of the Sakal group, confirmed the tax-related clause in the contract, and promised to continue the company's strategy to offer the most attractive prices.

Following the reduction in purchase taxes on some goods, particularly electrical domestic goods such as fridges and television sets, Sakal will have to compete more with the ordinary (non-duty free) stores. However, Sakal pointed out that the taxes were unchanged on some goods, and that purchases of more than $200 were still liable to customs taxes. On DVDs, video recorders and 25-inch TV sets, Sakal promised that his company would offer prices "at least 20 percent lower than in the domestic market."