People power has apparently won concerning the Finance Ministry’s proposed plan to impose VAT on fruit and vegetables sold to Israeli consumers in open air markets as well as in regular supermarkets. After intense pressure from a number of groups, including fruit and vegetable vendors themselves (who staged wholesale dumping of their produce at open air souks around the country) and from coalition partner Shas (many of whose members are poor and have large families), Prime Minister Binyamin Netanyahu overrode Finance Minister Yuval Steinitz‘s to levy the now 16.5 VAT on farm produce, saying that “sometimes it’s necessary to listen to the will of the people”.
But at the same time, however, the government is now formulating plans to increase the VAT on other items even further – to 17.5% – to make up for the 1.3 billion Shekel revenue short-fall that is expected to occur due to not imposing what is now known as the produce tax. Prior to the P.M.’s decision, many people were calling for Finance Minister Steinitz to resign. Those close to him say he is furious with the decision concerning the produce tax, and will not resign; even though opposition Kadima party members are calling this act “a sign of weakness” on the part of the present Likud party led government.
Raising the overall VAT another one percent will in the long run result in even more economic hardship than the VAT on fruits and veggies, as it will result in all other items, including staples like dairy items, bread, flour, cooking oil, and chickens being more expensive. Besides, it was argued that people would still find ways to circumvent paying VAT on produce purchases by buying from roadside stands and other black market fruit and veggie dealers. The idea to raise the VAT even more is something that had probably been in the Finance Ministry’s game plan since the new government assumed power in April, 2009. Despite a deep recession, the government has been desperately looking for ways to increase revenues without resorting to levying higher income taxes. Another thing that has become the new government’s problem is that the January Operation Cast Lead military operation left a big deficit in the previous government’s budget, which the new government inherited when assuming power. By gradually raising the VAT, the government is applying what is known as the salami technique in which they gradually raise the tax amount, bit by bit, like slicing a salami; until eventually they have the entire “salami” of increases with less protest from the general public.
As you can see, it’s obviously easier to get the entire salami, slice by slice, instead of trying to take the entire portion at once. The question now, however, is whether people are gullible enough to fall for this ploy; or whether they really can do anything about it, outside of outright rebellion.
Maybe Israelis will be more successful than the Iranians were at protesting government imposed policies. It all depends on how we like to eat our salami.
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