Study: Abolishing VAT on Food Would Be a Boon to the Poor

Israel could halve the number of impoverished households within 5 years by nixing VAT on food, study says

A study says Israel could halve the number of households under the poverty line within five years, without any substantial cost. The key: No VAT on food.

"The scope of poverty in Israel, about 20.6% of all households, is the among the largest in the developed world. This can be reduced by half within five years, without substantial additional cost to the budget, by implementing seven steps, including cancellation of VAT on all food products, instead of a gradual, across-the-board reduction," concludes a new study published recently by the Institute for Economic Policy.

The study, conducted by Dr. David Sheinin, shows that aboishing VAT on food is progressive, and would be highly significant for poor families, where food is a central component of household expenses.

The six other steps proposed by the institute's study are:

- Personal income tax reporting, similar to the method used in the U.S. This would enable detailed handling of economic failures.

- Drastic reduction in the number of foreign workers in Israel, to encourage employment of Israelis and increase wages in the weaker sectors.

- Encouragement of investment in traditional market sectors such as textiles, metal and construction to attract Israeli workers and replace cheap foreign workers.

- Immediate and complete transition to a long school day, until 5 P.M.for all pupils, including enrichment classes, assistance with homework and provision of two full meals to encourage women to work.

- Mandatory pension insurance to be financed by employees and employers, reducing the problem of elderly poor to a minimum.

- Financial support for every elderly person under the poverty line to raise them above it.

According to the study, in 21% of all poor households the average age of the head of household is over 65.

Sheinin argues that the large proportion of elderly among the poor reflects that they are not receiving adequate pension benefits to live on.

"Their economic condition is not expected to improve unless they receive additional income from the state," the report stated in its conclusions.