Hard Look / The Banner Burns

Tax cuts have been Prime Minister Benjamin Netanyahu's banner issue since the election campaign. He has doggedly supported tax cuts, contrary to most political analysts and the recommendations of all economists, including Bank of Israel governor Stanley Fischer. But yesterday he agreed to reduce his planned tax cut, which would have cost the state NIS 2.3 billion, by 50%.

Netanyahu's capitulation yesterday reinforces the complaint of his most vocal critics, that he's tractable and prone to changing his mind, depending with whom he spoke last. One of the main reasons on taxing fresh produce was the unequivocal announcement by Shas spiritual leader Rabbi Ovadia Yosef opposing VAT on fruits and vegetables. Another reason was the support his decision garnered from Likud Knesset members, even though party MKs were allowed to vote in keeping with their conscience.

At times yesterday, Netanyahu appeared ready to compromise on a gradual VAT on fresh produce, despite the announcement by Shas and several Labor MKs, who said their party would vote against the measure. In any case Netanyahu had a majority in the Finance Committee and the Knesset plenum, after United Torah Judaism and Yisrael Beiteinu pledged their support.

The prime minister's final decision runs contradicts the recommendations of all of his economic advisors. At Sunday's meeting at his bureau, he decided he would support the VAT on fruits and vegetables for two reasons: first, because there is no economic, political or ethical reason not to, and second, to prove that he is not tractable.

Netanyahu's consultants and cohorts thought that the VAT vote could and should be the long-awaited opportunity to prove that Netanyahu doesn't fear threats. But yesterday it turned out once again that at the decisive moment, Netanyahu consults with no one - and in the end makes the wrong decisions.

Finance Minister Yuval Steinitz was not happy with Netanyahu's decision. He's been waging bitter battle to levy VAT on fruits and vegetables, because he believed the exemption was wrong.

Steinitz argued the matter extensively with the prime minister. But then he realized that Netanyahu was starting to fold. The prime minister wouldn't go through with it.

Even though he opposed Netanyahu's position, the finance minister decided to support him, because he believes the prime minister has the final say on all things, including the economy.