Food Committee Urges Customs Tax Breaks on Hundreds of Products

Competition from overseas products that would likely ensue is designed to force Israeli manufacturers to keep their prices reasonable.

A list of hundreds of goods for which the Food Committee advises lowering or abolishing customs duty was published on Monday. Key foodstuffs like olive oil, chocolate and pickles are missing from the list, but gourmands can breathe easy - truffles are there.

The list, which was submitted to the Finance Ministry's customs division by the Ministry of Industry, Trade and Labor's Food Committee, includes hundreds of items.

Cheap truffles.

Competition from overseas products that would likely ensue is designed to force Israeli manufacturers to keep their prices reasonable.

Final approval by Finance Minister Yuval Steinitz remains pending, and the changes won't succor the people of Israel this Passover - but the direction is clear.

If the list is rubber-stamped, aficionados of gefilte fish are in for relief, if not this Passover then next. All other things being equal, carp for Passover 2013 may be a little cheaper after the Food Committee, headed by Ministry of Industry, Trade and Labor director general Sharon Kedmi, on Monday recommended canceling the 15% customs applicable to the imported fish - but at the same time nudged up the import duty from NIS 2.13 per kilo to NIS 2.50. The change will only be announced only after Passover this year.

But the message to Israel's fishmongers is clear as a bell. They won't be able to repeat shenanigans like jacking up prices right before a holiday, as happened at Rosh Hashanah last year. If they don't keep prices sane they'll face fierce competition from imports. The same goes for other manufacturers.

All the government committees that studied consumer prices following the cost-of-living protests last summer reached the same conclusion: The cost of food rose by more in Israel than in the West in recent years.

The Trajtenberg committee, headed by economic adviser Manual Trajtenberg, ruled that the food industry is too concentrated and recommended reducing or eliminating customs taxes to make imports more competitive. The Food Committee, which has been working for 10 months, was given the task of choosing which food items should have customs abolished or lowered.

The committee members came under terrific pressure from Israeli manufacturers hoping to thwart competition from imports suddenly rendered more affordable. Among their arguments were the global economic crisis, which has been depressing Israeli exports and made manufacturers more dependent on the local market. But then there were the importers, who urged the elimination of import levies and taxes for the sake of competition.

Actually, nothing has been done to ensure that the tax cuts will reach the consumer, rather than simply reach the importers' bank accounts, but that's another story.

Opponents of the proposals were given a chance to voice their objections to the Finance Ministry's customs division before the list's publication on Monday (on the ministry's website, in Hebrew ). Voice opinions they did, but sources in the know regarding the list's compilation by the Food Committee don't believe changes will be made from this point. The list was designed to balance the interests of manufacturers versus the interests of the general public, they explain.

This week Israel's tuna canners asked the Histadrut labor federation to intervene and support the local industry against competition. But the 12% customs tax on canned tuna imports will remain. What has been canceled is the import levy of NIS 3.50 per kilo of fish, and Histadrut Chairman Ofer Eini is not expected to meddle in that Finance Ministry decision.

Arie Zeif, former head of the customs and VAT division at the Finance Ministry and today president of the Israel Chambers of Commerce, obliquely defended reducing taxes on luxury niche delicacies such as caviar and saffron, not to mention truffles, alongside more popularly consumed foods.

"The message is important," Zeif said on Monday. "That's the way to promote competition. Niche products aren't imported in large quantities, so they won't affect Israel's customs revenues. The direction is important because local manufacturers realize they have to keep their prices sane."

Zeif thinks however that the Food Committee erred in declining to lower customs tax on imported olive oil, for the sake of protecting local industry. He suspects however that decision will change in time.

The list of foods for which customs could be reduced or abolished includes fresh and preserved fish, sunflower seed oil, fruit and vegetables, beef and mutton, poultry, juice, cakes and other baked goods, fresh garlic, nuts and dried fruits, raw materials for food manufacturers - and flowers.

If the list is approved, customs on imported beef will be slashed from 190% to 12%, but the Finance Ministry will start charging a tax of NIS 13 per kilo. Customs on imported chicken will drop 75%, and the levy on mutton will fall from 50% to 30%.

By the way, while truffles will become more affordable, assuming Steinitz signs off on the list, other cheaper fungi such as shiitake and oyster mushrooms aren't on it, in order to protect Israel's champignon farmers.

In some cases the tax relief will be seasonal. If approved, cauliflower for instance will be exempt from customs only from September to February, and watermelons from October to May, in other words - when Israeli farmers don't grow them.

Moreover, some of the changes will be all but immediate, while others will take years, to give manufacturers time to adjust.

Zeif for one is confident that items left off the list this time, such as powdered milk, will get there eventually. "First of all you deliver the message," he said on Monday. "Now manufacturers realize they have to keep prices real."