JERUSALEM, Israel - Israeli Prime Minister Binyamin Netanyahu shelved the much-disputed VAT (Value Added Tax) on fresh fruits and vegetables.
"A central part of my job is to listen to the public," Netanyahu said, "and I've come to the conclusion that this is not the time for a new VAT. This is my decision," the prime minister said in a joint statement with Finance Minister Yuval Steinitz, released on Monday evening.
The 16.5 percent VAT, which is applied on almost all products, would have yielded 1.8 billion shekels (approximately $5 million) to the Treasury.
Besides the public outcry, the left-wing Labor party and the ultra-Orthodox Shas party were against taxing produce, saying it would inflict hardship on the most vulnerable - the elderly on fixed incomes and the Orthodox community, who usually have larger families.
"I am happy that the prime minister and finance minister are sensitive to the public's feelings," Interior Minister and Shas party chairman Eli Yishai said, adding that it would have been "a black stain" on the nation's tax laws.
Merchants buying and selling fresh produce in the nation's open air markets also opposed the tax.
But Steinitz believes fresh produce should be taxed along with all other products.
"I'm still convinced that we need a uniform VAT on all products, but there is only one prime minister in Jerusalem and that is his decision," the finance minister said.
In a no-confidence motion marking the government's first 100 days in office, opposition leader and Kadima chairwoman Tzipi Livni called the government's 2009-2010 state budget "cruel."
In addition to Livni's remarks, Kadima issued an official party statement accusing Netanyahu of caving in to pressure from Labor and Shas.
"The prime minister doesn't miss an opportunity to prove that he is weak and cannot be believed," the statement read.
"On both diplomatic and economic issues, his word has no value. He does not care about the public, only about his own political survival," the party stated.
Sources: YNet news, The Jerusalem Post, israel national news