Following a two-hour meeting late Monday between Prime Minister Binyamin Netanyahu and Finance Minister Dr. Yuval Shteinitz, the prime minister made his position clear, there will be no VAT tax levied on fruits and vegetables, apparently accepting Shas’ firm position opposing the move. Shteinitz remained insistent, stating the matter should be voted upon in the Knesset Finance Committee and Knesset, but the prime minister would not hear of it, burying the NIS 1.8 billion package before it gets out of the starting gate.

To cover the lost revenue, the prime minister explained a tax reduction that was planned will be minimized and income tax will be reduced from 46% to 45%, not 44% as planned. In addition, corporate tax will drop to 35% and only in 2010 will it be reduced again, to 24%.

The prime minister stated that as part of his job he must be sensitive and hear the people, and he has come to the decision that this is not the time to levy a value added tax. The prime minister added that the budgetary framework must be maintained and the deficit must also remain balanced.

Shteinitz announced that while he is not pleased with the decision, he accepts it, but added he feels an across-the-board VAT tax should be imposed on all items, but unfortunately, his position was not accepted. “There is a prime minister in Jerusalem and that is the decision”. 

Contradicting reports are persons close to Shteinitz, releasing statements to the media on Tuesday morning that the VAT tax on produce issue is not over yet, determined to push the tax bill through.

(Yechiel Spira – YWN Israel)