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Finance Minister Yuval Steinitz is threatening that there will be no budget if Knesset Members do not approve two items: Levying value added tax on fruits and vegetables and canceling tax deductions for childcare expenses. Speaking to TheMarker, Steinitz said the two items were critical to the budget. His comments came in the wake of the increasing objections by MKs, including a large number from his own Likud party, to the two measures.

"This week we will introduce legislation to cancel the tax deductions for child care. If the Knesset thwarts this legislation or the VAT on fruits and vegetables, we will not be able to absorb the NIS 4.8 billion blow to the budget," he said.

Steinitz said the childcare credits will cost the treasury NIS 3 billion in 2010, but in the end will cost NIS 30 billion as the Supreme Court's logic in the case will also allow deductions for travel expenses to and from work. As to the VAT on produce, he said revenues would be NIS 1.8 billion a year, of which only NIS 150 million would come from the poorest Israelis.

"The state is giving a NIS 1.8 billion break to cheaters, institutions and the rich in order to transfer NIS 150 million to the poor. I can give the poor the same NIS 150 million in other ways and benefit from the NIS 1.8 billion," said Steinitz.

Netanyahu to meet rebels today

Prime Minister Benjamin Netanyahu has called an urgent meeting today with Likud MKs who are refusing to support the VAT on fruits and vegetables. At the moment, the coalition does not have a majority in the Knesset Finance Committee to pass the measure.

It is not only Likud Mks who object to the measure, but also MKs from all the other coalition parties.

The Knesset is scheduled to vote on the two-year budget for 2009-2010 and the Economic Arrangements Law in its first reading on June 16, and the Finance Committee is supposed to pass it a few days later. But only two weeks before the budget is to be submitted to the Knesset, Netanyahu is being forced to use all his powers of persuasion to bring his own Likud MKs back into line. The main Likud rebels are MKs Ofir Akunis, Miri Regev, Yariv Levin, Carmel Shama, Danny Danon, Tzipi Hotovely and the Likud whip of the Finance Committee, Zion Fanian.

Steinitz met with the rebels on Wednesday. They criticized the VAT proposal, saying "It will never pass, it's a waste of time." Regev said the new tax will hurt the very Likud voters who brought them to power. Akunis recommended putting off next year's tax cuts instead.