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Finance Minister Yuval Steinitz opposes the immediate cancellation of the "drought tax," even though Prime Minister Benjamin Netanyahu supports ending the hefty tax on water usage.

As revealed yesterday in TheMarker, Netanyahu has decided to freeze the levy after the harsh public response to recent water bills - and the political response in the Knesset. In addition, the premier has also decided to reduce the water price hikes scheduled to take effect on Jan. 1, 2010, and to raise the rates gradually. All together, these decisions would create a NIS 1.2 billion hole in the state budget.

The Finance Minister's bureau said yesterday: "The finance minister has not proposed at any stage to cancel the drought tax, but has reiterated his position from last summer that if we have a particularly rainy winter, the tax in its present form will be reexamined at the end of the season."

Steinitz thinks that "despite the burden placed on a small number of citizens by the tax, and especially on those with gardens and private [swimming] pools, this is an essential step that has already lead to a significant savings in water usage, and it is appropriate for the serious shortage we are having after a number of very dry years," said ministry sources.

Lots of pressure, not just from Shas

Netanyahu instructed the director general of the Prime Minister's Office, Eyal Gabai, at the end of last week to examine ways to cancel the tax. Yesterday, the Ministerial Committee on Legislation decided to put off for two weeks any action on the matter.

In addition to the huge number of complaints Netanyahu has received on the subject, Shas chairman and Interior Minister Eli Yishai has discussed it a number of times with the prime minister: Yishai has told him bluntly that he needs to annul the tax, and made it clear that Shas will support its cancelation in the Knesset. Yishai has therefore advised Netanyahu to take the initiative to stop or at least freeze the tax himself, and not be seen as having been lead against his will by the Knesset.

The Knesset Finance Committee will debate the issue of water prices and the drought tax this morning. Gabai and the head of the Water Authority, Uri Shani, will attend the meeting.

The National Infrastructures Ministry also supports freezing the tax for the winter, and reducing the planned price hikes.

To freeze the water tax and the increases, the cabinet could either propose its own amendments or support one of the private member's bills now on the agenda. MK Moshe Gafni (United Torah Judaism), the chairman of the Finance Committee, will introduce his own bill to freeze the tax today. MK Miri Regev (Likud) has already introduced a bill to give the Knesset supervisory authority over water prices.