Israel’s treasury widened its offensive against food companies, releasing a study on Sunday showing that profitability at the companies reached a 20-year high in 2016.
Treasury economists said the rate of pre-tax profits at 10 food businesses surveyed was 12.7% in 2017, up from 7% in 2007, or a combined 500 million shekels ($133 million at current exchange rates). The figures were based on 2016 tax filings, the latest that are available and related to privately own companies only.
“That is an exceptional rate of profitability for companies in old-economy industries and in the wholesale business (importing food),” the report said.
The survey comes as Finance Minister Moshe Kahlon seeks to reverse or at least moderate a series of price rises planned not only by food companies but in the electricity and water sectors. Food makers began announcing increases last August while a host of importers have already put hikes into effect.
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The food companies have said higher costs for wages, electricity and raw materials have left them no choice. They blame the government for as much as 20% of the high costs they have to contend with by, among other things, a rise in electricity rates and the minimum wage.
The treasury report noted that food prices in Israel were on average 25% higher than in countries belonging to the Organization for Economic Cooperation and Development in 2014 based on purchasing power parity.
The finance minister dismissed the assertion that rising minimum wages affected the food companies’ costs. It said only 30% of all food industry employees earned the minimum wage and that in the years 2014-17 wages in the industry rose only 3%, versus 7.9% for the business sector as a whole.