Israel cuts product tariffs in bid to lower cost of living

Finance Minister Moshe Kahlon announced Monday he was abolishing customs and purchase taxes for a total of NIS 800 million ($227 million) per year, a move the ministry hailed as the “largest tariff cancellation program to take place in the State of Israel since the 1990s.”

The plan will abolish about a quarter of the total industrial tariffs in Israel today on a wide range of products, including electronics, cosmetics and toys.

“Today we are announcing an additional NIS 800 million that will be returned to citizens as part of the plan,” Kahlon said at a press conference in Jerusalem. The cuts will join other steps, including cuts to value-added tax, income tax, and corporate tax that have been implemented by the government over the past two and a half years, he said.

“We will continue to lower taxes and customs, open the market to competition, and lower the cost of living for the public,” he said. Next year, he said, “will be the fourth consecutive year of tax cuts.”

Prime Minister Benjamin Netanyahu’s government has been under pressure to lower the cost of living and the prices of essential consumer goods since 2011, when thousands of protesters took to the streets to protest the high cost of living in Israel.

The new plan envisages cutting purchase taxes for a total of NIS 245 million a year on electronics. Consumers currently pay a purchase tax of between 10 percent and 30% on electronics and entertainment products. After what has been dubbed by the ministry the “Net Discounts” program, purchase taxes on TVs, speakers, display screens, VCRs, projectors, amplifiers, amplification systems, microphones, headsets, LCD monitors will be cut to zero.

In addition, customs payments will be cut to zero on a number of products, including electric and lighting products such as lamps and chandeliers, cosmetics, textile and toys, amounting to savings of NIS 568 million a year, the Finance Ministry said in a statement.

Today consumers pay a maximum of 12% on appliances. The new plan now envisages zero customs on refrigerators, heaters, water boilers, electric cookers, home freezers, food mixers, and juicers for fruits and vegetables. The cancellation of the customs on appliances will lead to savings of about NIS 60 million a year, the statement said.

Cosmetics will include shampoos, hair products, sunscreens and deodorants, on which a 12% customs duty is currently applied. Custom duties on textiles, on which a tariff of 6% was imposed, will cover all clothing items including coats, dresses, skirts, pants, shirts, belts, gloves, socks, scarves, jeans, sweaters and tank tops. There will also be no levies on video games, gymnastics equipment, home swimming pools and children’s pools, party products, and games.

To ensure that the cancellation of the custom duties and the purchase tax won’t be used by importers to raise prices, the Finance Ministry plans to anchor them within a temporary order until the end of 2018, the statement said. The cancellation of customs duties will take place after a hearing, while that of the purchase tax will take place in the coming days, the ministry said.