In recent months, Finance Minister Moshe Kachlon has instituted numerous changes in import policy, removing duties and taxes from butter, meat, dairy products, vegetables and other food items. The point of the program, according to Kachlon, is to lower the cost of living by making food cheaper – but according to Dan Propper, one of the heads of Osem, Kachlon is ruining the Israeli economy with his policies.
Propper made the comments as MKs visited his and other factories in southern Israel. MKs Ofer Shelach, Ayelet Nachmias Warbin, Michal Biran, Eitan Broshi, Meir Cohen, Miki Levy, Oded Forer, Meirav Ben-Ari, Oren Chazan, Yulia Milonovsky and Yaakov Margi represented nearly every party in the Knesset on the visit, which aimed to give the MKs a better understanding of the economy in southern Israel.
The answer to the high cost of living is to slash VAT sales tax on basic food items, said Propper. “I am not strictly opposed to imports,” he said. “For me, as an owner of Osem, it’s actually easier to import than to produce. But if I do that, I close down a factory because I don’t need the workers. Statistically, every million dollars in imports costs 4 to 5 manufacturing jobs. I and others can import without limit, but this would ruin the economy.”
Propper suggested instituting a differentiated VAT rate for basic foodstuffs. “In some European countries they have 17-percent or 18-percent VAT on purchases like we do, but only 7 percent VAT on food.” He added that as far as he knew, food in Israel costs as much or as little as in Western Europe. “It’s possible that here and there sellers unfairly raise prices, but the majority of prices are the same here as elsewhere,” Propper said.
Shraga Brosh, head of the Israel Industrialists Association, expressed similar thoughts, telling the MKs that the government had failed Israeli manufacturing by not investing enough money in production technology. “If there was a lower VAT rate for food, the cost of food would drop significantly,” he said. “In Britain, VAT on food is zero percent, and in other parts of Europe it is 7 or 8 percent. There is no reason Israel should charge 17 percent VAT on basic food.”