Treasury Vows to Override Trade Ministry, Reduce Tax on Food

The local business sector claims that reducing customs levies on food items will financially hurt local producers.

The Finance Ministry is determined to lower customs duties on imported food by the end of the month, to the extreme dismay of of manufacturers who have persuaded the Industry, Trade and Labor Ministry to resist any such notion.

The local business sector claims that reducing customs levies on food items will financially hurt local producers.

Meanwhile, the Tax Authority is in the final stages of formulating a list of food products on which Customs duties could be reduced, or abolished outright. The list constitutes an additional move on top of the recommendations for lowering food prices proposed by the Trajtenberg Committee on socioeconomic change. The Trajtenberg Committee, headed by prime ministerial adviser Manual Trajtenberg, was given the job of looking for ways to lower the cost of living for Israelis.

The two ministries are negotiating the issues. On Wednesday the Industry and Trade Ministry said it would try to reach an agreement on lowering customs duties as soon as possible.

But the committee appointed to examine how to lower food prices for consumers, headed by the director-general of the Industry and Trade Ministry, Sharon Kedmi, is only scheduled to present its recommendations in another three months.

The treasury wants to include both food products produced in and out of Israel in an attempt to increase competition and lower prices. But the Industry and Trade Ministry objects to lower duties on imports, which would harm local producers.

Today there are some foodstuffs that have customs duties of over 100% - which effectively prevents the import of those products. Such products include olives, fresh meat, butter, popcorn, french fries, milk powder and many more.

The Tax Authority is examining all such duties on a detailed basis and will propose a schedule for lowering them. The treasury's plan for reductions will be spread out over three years.

Sources close to the talks, however, say the treasury is not interested in lowering duties in cases where they will harm farmers significantly. For example, ketchup imports would hurt tomato farmers and have been taken off the table.

Products that are candidates for customs reductions include fresh and processed beef, juices, fish and lamb. Various vegetables and grains that are not produced locally are also on the list, such as oats and raisins. In addition, certain food products that are used as raw materials for the food industry are on the list, such as liquid glucose and lecithin, even though they are produced locally.

Local manufacturers have put heavy pressure on the Industry and Trade Ministry to resist the changes for products produced in Israel, at least until the global economy recovers. They say reduced duties will force them to fire workers. The treasury's response is that the lower prices for consumers will increase competition and could possibly solve specific, local problems of high unemployment.