Finance Ministry said mulling tax cuts amid protests over soaring cost of living

Finance Minister Avigdor Liberman will present the government with plans next week to try and stem the soaring cost of living in Israel, which could include tax cuts for low-to-medium income earners, Channel 12 reported Friday.

Consumers have in recent days protested, expressing outrage over the rising costs of housing, consumer goods, gasoline and electricity, and several manufacturers bowed to pressure from lawmakers and agreed to postpone planned price hikes.

“The market has done its part and now we need to deal with the part that the government is responsible for,” Channel 12 quoted a senior government official as saying.

The official said that while housing prices, which soared over 10% last year, were the greatest concern, efforts to deal with that would not have an immediate impact, so the Treasury was looking at other solutions to bring relief to those hit hardest by the rising prices.

Channel 12 said officials were considering further cuts to import duties, subsiding part of the increase in electricity prices and cutting taxes for those in lower-income brackets.

The tax cuts would apply to those earning less than the average salary of some NIS 11,000 ($3,400) per month. The report said it was not clear if the cuts would come by shifting the tax brackets or by giving credits to those eligible.

Finance Minister Avigdor Liberman speaks during a Yisrael Beytenu faction meeting at the Knesset, on January 10, 2022. (Olivier Fitoussi/Flash90)

The report did not detail the extent of the cuts or their impact on the budget.

The moves come as the finance and economy ministries have attempted to limit the dramatic increase of prices, leaning on companies to hold off on the hikes while people are still dealing with economic hardships brought on by the COVID-19 pandemic.

They have had some success with Osem-Nestlé, one of Israel’s largest food manufacturers, announcing Thursday it was canceling a planned increase in food prices amid a massive public uproar.

The company said it was nixing the price hike despite “an unprecedented rise in operating costs in the past year,” out of “a true desire to be attentive to the feelings of the Israeli public.”

The company had already said on Tuesday that it would delay the plan by several months.

The planned price increases on a wide array of consumer goods had been announced by some of Israel’s largest food manufacturers and distributors, including Osem-Nestlé, as well as by international import giants like Diplomat and Schestowitz Ltd.

On Wednesday food importer Diplomat said it was joining Osem in delaying price hikes until at least after the Passover holiday in April. It did not immediately announce if it would also follow Osem in nixing the increase altogether.

Diplomat said the planned increase in prices was due to rising operating costs and that the delay will cause the company economic damage.

Photo illustration of Osem brand pasta. (Hadas Parush/Flash90)

The hikes were slated to raise the costs on goods such as ketchup, pasta, rice, household cleaners, and much more by several shekels in some cases. The price of a four-pack of StarKist tuna cans was set to rise by 6-8 percent, reaching NIS 27 ($8.50), for example. The prices of dairy products were expected to rise by 3-9%.

Histadrut labor union head Arnon Bar-David sent a letter to Finance Minister Avigdor Liberman and Prime Minister Naftali Bennett on Tuesday, urging them to take decisive action against what he described as “exploiting the Israeli public,” and threatened a “widespread protest” if prices are not lowered.

“The big manufacturing companies are reporting high profits. The main reason for their repeated price increase stems from one fact — they simply can,” Bar-David’s letter read. “I urge you to be uncompromising toward any commercial body that exploits its status to exploit the public.”

Cleaning equipment and services giant Sano said Monday it would not lower the prices of some of its products that saw an increase in prices during December, while the Strauss Group said it will not increase prices further.

The announcements came after Liberman and Economy Minister Orna Barbivai sent warning letters to the heads of major food companies and retailers on Sunday, urging them to reverse their decisions to raise prices on food products this year, pointing to financial information showing large revenues and executive bonuses in the last year.

Liberman blamed food companies for trying “to profit at the public’s expense” and congratulated the companies that “showed solidarity” by choosing not to increase prices at this time. He said that the Finance Ministry will “use all tools at its disposal” to monitor the activity of companies that did increase prices.

Israelis are also dealing with jumps in the cost of electricity, which is rising by 5.7% this month, costing the Israeli household an estimated addition of NIS 35 (just over $11) per month.

The price of gasoline will increase by NIS 0.34 ($0.11) per liter, costing the Israeli consumer an addition of NIS 17 ($5.36) on average while refueling their car.

Liberman has defended the energy cost hikes as modest compared to the rest of the world.

Throughout 2021, the cost of consumer goods in Israel rose by 2.8%, the highest rate in 13 years, according to data released by the Central Bureau of Statistics.

Rises in the consumer price index were seen in clothing and footwear (1.1%), home furnishings (0.7%), and food (0.5%). Meanwhile, national housing prices continued their steep rise, with average prices for homes across the country rising by 10.6%.

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