The Ministry of Agriculture and Ministry of Finance plan to implement reforms of the agricultural sector by the start of 2017, or earlier, sources inform “Globes”. The ministries intend to approve a plan to end import taxes on all food products alongside the plan to end production quotas for eggs and milk.
A senior government source said, “After a gradual implementation of the reform, all imported non-processed food will be exempted.”
What does that include?
“Vegetables, fruits, fresh and frozen meat, frozen vegetables, poultry, dairy products, eggs, honey, and olive oil.”
Based on an economic calculation conducted by the Ministry of Agriculture, implementing these reforms will save Israeli consumers NIS 2.6 billion, with the overall savings potentially reaching NIS 3.25 billion.
How much tax revenue will the state lose?
“On most products, the impact will be marginal, because the import taxes are not in place to enrich the state coffers but to protect domestic production; but if the farmers are compensated, they do not need protection. The import tax today is high, making import unprofitable, but it does not generate significant revenue, it limits supply. If there is ample supply, the prices will go down. No one will charge high prices because they will have competition.”
He said paying the farmers financial compensation for their losses will allow the reforms to proceed. The Ministry of Agriculture expects to wrap up negotiations with the farmers, and conclude hearings with other groups, by the end of June. The ministry intends to present the plan for government approval in July, fast-track any necessary amendments to the legislation, and implement the reforms by 2017 or earlier.
The revolutionary plan from the two ministries could change the foundations of the market and will likely be strongly opposed by the farmers. The subsidies to the farmers will hurt the sector and annihilate certain fields.
The state of Israeli farmers
This week, the Ministry of Agriculture and Ministry of Finance concluded negotiations with farmers to open the market for Passover, for which the farmers will be paid NIS 78 million. Fish farmers will receive NIS 37 million of that sum; the 12 largest fisheries responsible for 80% of local production will each receive NIS 2.5 million.
A senior government source told "Globes" that the decision to compromise with the farmers through compensation was strategic. “It was worth paying them a lot of money for Passover to get them to agree. It doesn’t matter if prices go down for Passover. It matters the farmers understand the government will pay them for each shekel lost.”
Surprisingly, the Ministry of Agriculture does not have a concrete count of farmers in Israel. The estimate places the number between 6,000 and 11,000. Exact figures are only provided for egg and dairy farmers. Even if there are 10,000 farmers that will be eligible for monthly compensation for life, the total cost is believed to be NIS 1.5 billion.
One senior government source said the plan was worthwhile even if the compensation exceeded that estimate.
Published by Globes [online], Israel business news - www.globes-online.com - on March 10, 2016
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