Plan to Eliminate Duties on Personal Care Items Hindered by Red Tape

Treasure and Tax Authority sought to end tariffs on eyewear and baby goods to lower living costs for young families

FILE PHOTO: Kleenex brand facial tissues sit on display for sale
Bloomberg

Two and a half months ago, the treasury and the Israel Tax Authority announced they would be lifting import duties on baby products, contact lenses and eyeglass frames. It was supposed to be part of Finance Minister Moshe Kahlons Net Family program to help reduce living costs for young families.

The last obstacle to canceling the duties was a public hearing on October 26, Kahlon office said. Yet more than a month later, the orders putting them into effect have yet to be signed — and no one can fully explain why.

The Finance Ministry hints that the cause is a dispute with the Economy and Industry Ministrys Foreign Trade Administration. But the Economy Ministry says it gave its approval for the duty cuts back in June. Its only proviso was that they remain in force for two years, which in any case isnt a problem because they were being put into effect as an emergency order that would automatically expire after 18 months. Israel is negotiating free-trade area agreements with a group of Asian countries, from which Israel imports lenses and frames, and permanently canceling the duties would weak its bargaining position.

The Finance Ministry spokesman declined to comment. At the Israel Tax Authority, a spokesman said that after hearings and consultations with the Foreign Trade Administration, it forwarded its recommendations to Kahlon early this week.

The treasury plan calls for removing duties on eyeglass lenses and frames, as well as on baby bottles, pacifiers, swings, walkers and high chairs, all of which are subject to duties of 12%. It will also include baby carriages, which carry a 6% duty. All told, it would amount to 44 million shekels ($12.6 million) in tariff reductions that would presumably reach consumers.

Those savings were hailed as the final element of the Net Family (as in net income) program Kahlon unveiled in April, but other parts of the scheme have also stumbled on their way to implementation. Duties on shoes were eliminated, as was the purchase tax on cellphones.

But duties on baby clothing were not, after encountering resistance from local manufacturers, who didnt welcome lower-priced competition, and from the tax authority, which said it would be too complicated for customs officials to have to go through shipments of imported clothing in order to separate out the baby togs.

The delays werent the first for Kahlon, who has made bringing down the cost of living one of the hallmarks of his term as finance minister. Four months ago, he and Economy Minister Eli Cohen vowed to put infant formula under price supervision as part of Net Family, but a month ago they backtracked without ever making a public statement to that effect.

Retailers arent happy about the delays and backtracking.

Its a pity that the people of Israel think the government has decided to lower the tax on eyeglasses and contact lenses and in the end doesnt, said Yaacov Halperin of the Optica Halperin chain of eyewear stores.

I had already started lowering prices because customers were coming in to complain that prices hadnt changed and we found ourselves apologetic and defensive about it, Halperin said. The Finance Ministry never announced it wasnt happening so the public expects lower prices.

Halperin said there was no logic to the duties in any event, because there was no local optical industry to protect.

Eyewear is a medical device that isnt an option for people with poor eyesight and shouldnt be subject to a 12% duty, which he called a fine.