The government’s proposed first-ever tax on fruits and vegetables will add nearly NIS 100 ($24) to the monthly budget. In addition, the budget calls for an across-the-board hike by one percent in the value added tax (VAT) -- a form of sales tax -- on all non-food expenditures, adding even more to family outlays.
Figures from the Central Bureau of Statistics (CBS) reveal that families that earn less than NIS 7,000 a month spend approximately NIS 250 ($60) a month on fresh produce. The yearly bite out of the family budget amounts to more than NIS 3,000 ($220), and the proposed VAT tax will add 16.5 percent to the cost of fruits and vegetables.
The figures are based on Central Bureau of Statistics (CBS) data from 2006 and do not take not account today’s higher prices. An informal survey of lower-income families by Israel National News revealed that actual expenditures on fresh produce is as high as NIS 400-500 ($96-$120) a month.
The CBS statistics also reveal that while families in the lowest income bracket spend 3.5 percent of income on fruits and vegetables, the outlay of those in the highest income bracket reaches only 1.5 percent. The figures bear out charges that applying VAT to fruits and vegetables will hurt the poor far more than wealthier Israelis.
Finance Ministry spokesman Shlomi Shefer agrees that the poorer people will be hurt more but blames others, including Prime Minister Binyamin Netanyahu. “We did not suggest this in the original budget plan,” he told Israel National News Thursday morning.
According to Shefer, the ministry had to find sources of income to pay for expenditures that the Prime Minister restored to the first budget proposal. “Our original budget plan was better socially,” he said.
The final budget plan that was approved by the Cabinet on Wednesday also calls for an across-the board hike in the VAT by one percent. The rise, along with the VAT on fruits and vegetables, will cause upward pressure on the consumer price index, which already is rising due to higher energy prices.
When he was Finance minister in the Sharon government, Netanyahu cut the VAT from 18 percent, a move that was credited with helping the unprecedented economic boom that screeched to halt with the financial crisis last year.
However, Shefer rejected the idea that raising the VAT will hamper economic recovery.
The good news for consumers is the strong possibility that applying the VAT to fruits and vegetables will be scrapped altogether because of the difficulty in administering it. Meir Yifrach, an official for fruit and vegetable growers, explained that the constant changing prices of produce makes the tax impractical.
“The price of vegetables changes not only every day but also even from hour to hour,” he said. “How can you write down the tax on the same account when the price changes three times the same day?
Yifrach also said that the cost to vendors for collecting the tax would raise the basic price of fruits and vegetables. Although most produce now is sold in supermarkets, approximately one-third still is sold in open air markets, where vendors do not have the time and facilities to keep accounts on transactions.
He also suggested that many vendors would find ways to avoid the tax altogether.