Israel to Eliminate Duties on Baby Products, Eyewear

But measures unlikely to have much effect on prices after treasury backs off on wider measures, say importers

File photo: Baby products.
Daniel Acker/Bloomberg

The Finance Ministry said on Sunday it would be eliminating, at least for now, duties on a range of baby products as well as contact lenses and eyeglasses, but people in the business said the impact would be minimal.

The baby products that will no longer be subject to duties include pacifiers, bottles, high chairs, walkers and swings, all of which were subject to a 12% tax, and baby carriages, which had a 6% tariffs on them. Contact lenses and eyeglasses, which were also included in the cuts, had a 12% rate.

All of the duties will be eliminated at the end of October under an emergency order being issued by Finance Minister Moshe Kahlon, and remain in effect until the end of 2018.

Canceling the duties is part of Kahlon’s “Family Net” (as in net income) program he unveiled in April that includes a series of measures aimed at reducing the high cost of living. They are the last element of the program to be implemented after duties on shoes were eliminated as was the purchase tax on cellphones.

Kahlon’s original plan had called for eliminating duties on baby clothes, but the proposal ran into opposition from local manufacturers as well as from the Israel Tax Authority, which said it would be too complicated for customs officials to have to sift through shipments of imported apparel to divide baby clothing from all others.

Israeli Finance Minister Moshe Kahlon gestures as he speaks at an event in Ofakim, southern Israel May 29, 2017.
AMIR COHEN/REUTERS

In fact, the latest move will have little impact on Israelis’ household budget because for the most part they are low-cost items. The treasury estimates it will lose only 44 million shekels ($12.5 million) of tax revenue by ending the tariffs.

In particular, canceling the 12% duty on eyeglasses is largely symbolic. The most popular and expensive overseas brands are imported from Europe and not subject to duties. Eyewear from China, which will now be exempt, is already low-priced.

“It’s very populistic to say that eyeglasses will be duty-free, but for the most popular brands, like Ray-Ban, Prada, Dolce&Gabbana, Oakley, Gucci, Dior and Carrera, it’s not relevant at all. Duty-free products account for more than 50% of the market,” said one person in the industry, who asked not to be named.

Chani Turner, CEO of The Little Prince, the importer of Tommee Tippee baby products, said she would be reducing her prices by 12% when the new customs exemptions come in, but said that for retail prices to come down more the government would have to address the costs imposed by the Israel Standards Institute on imports.

“Importers pay for each shipment 4,000 shekels on every product category they bring in – on bottles, nipples, cups, eating utensils, pacifiers and other things, That means on each container we pay 20,000 shekels on average just for product standards,” she said.