Lapid Under Pressure as Netanyahu Calls for Lower Food Duties; Budget Faces Delays

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Finance Minister Yair Lapid.Credit: Emil Salman

Finance Minister Yair Lapid was feeling pressure from all sides Sunday, as Prime Minister Benjamin Netanyahu made a loud call for a new policy on food prices in defiance of Lapid’s plans, while he faced an obstreperous Knesset on both the 2015 budget and the zero-VAT law.

Netanyahu told a meeting on economic strategy, which the finance minister did not attend for reasons that were unclear, that duties on imported food must be reduced or eliminated entirely. “This can be done [when] the finance minister signs off. Such a measure will immediately create competition and lower prices,” the prime minister said.

The policy proposal stands in contrast to Lapid’s plan to bring down food prices, which he articulated last week, by imposing controls over products such as whole wheat bread, yogurt, soya milk, frozen vegetables and toilet paper.

Among the products the Prime Minister’s Office has proposed to begin easing duties on are dairy products, milk, honey and eggs, all of whose prices are 30% to 55% higher because of the duties. They raise the price of yogurt by 34%, soft cheese by 36% and fish by 28%.

The committee decided that a team headed by Harel Locker, director general of the PM’s office, would examine the issue in the next several days.

Food prices have become a hot political topic in the last weeks after a Facebook posting showed the price for the German equivalent of Israel’s popular Milky chocolate pudding was just one third. The social media brouhaha that followed echoes the 2011 protests over cottage cheese prices that led to an explosion of street protests that summer and helped bring Lapid’s Yesh Atid party to power.

Netanyahu proposed that the government recoup the lost revenue from lowering duties on food by imposing a special tax or fee on people who own three or more homes, a move Lapid has in the past said he opposed.

Under two proposed options, landlords would pay an annual tax equal to 2.5% of their properties’ value or a flat 10,000-shekel (about $2,600) charge every year. The treasury estimates there are 200,000 homes whose owners have three or more properties.

High estimates are that taxing them could bring in 2.5 billion shekels of tax revenue, but others say it could yield just hundreds of millions of shekels – and then only if the Tax Authority strictly enforces collections.

Meanwhile, Knesset sources said the first reading of the 2015 budget would not occur tonight as would normally be the case after it is brought to lawmakers because of procedural disputes. Lapid is due to introduce the budget and its accompanying Arrangements Law today.

With the budget already weeks behind schedule, the delay would mark the latest in a series of setbacks for Lapid in trying to shepherd the budget through the cabinet and Knesset.

The procedural issue revolves around Lapid’s demand that the Arrangements Law be deliberated entirely by the Knesset Finance Committee, while Zeev Elkin (Likud), chairman of the coalition, wants it divided up between various committees as has been the practice in the past.

In particular, Likud lawmakers want the clause in the law that would force the Jewish National Fund to hand over 1 billion shekels of its revenues to the state to be given special treatment.

The two sides tried to reach an agreement on the issue yesterday, but failed. A delay in the first reading of the budget and Arrangements Law could also be ensnared by the so-called Zero-VAT law, Lapid’s centerpiece legislation for bringing down housing prices.

Lapid has threatened to quit the government is the law isn’t passed. But yesterday, zero-VAT, which would exempt many buyers of new homes from the 18% value-added tax, was entangled in demands by the Habayit Hayehudi party.

Headed by Economy Mister Naftali Bennett, the faction is insisting that its support for zero-VAT hinges on Lapid’s approving extra money for West Bank settlements. A key demand is 300 million shekels in funding for road building in the settlements, which Lapid himself publicly opposed two weeks ago.

Yesterday, Bennett’s office said “there had been no change in his stance regarding zero-VAT.”

Habayit Heyehudi’s power over the fate of the legislation lies with Nissan Slomiansky, chairman of the Knesset Finance Committee, who can decide how quickly the law is voted on. During deliberations on the law, Slomiansky was able to wring a 20 million-shekel allocation for local authorities in the West Bank and a promise for an equal amount after the law is passed.

Yesh Atid warned yesterday in a statement, “If someone wants to go to early elections, failure to pass zero-VAT is the way to do it.” For his part, Slomiansky said yesterday he knew of no crisis and was planning to proceed on the legislative debate and vote as planned.