"Many people will die because of the 0% VAT law. NIS 50 billion could be used to increase the budget in many areas," former Ministry of Finance chief economist Michael Sarel said today. Sarel resigned his position following the proposed 0% VAT bill.

Sarel said, "The supply has already grown, but not enough. Increasing the supply to fill the demand will take many years. In the short term, we must go in the opposite direction of this law by reducing the demand, which will stop the rise in prices. Politically, it's illogical to expect the government to repeal this benefit in the future; we have very experience with it; it's impossible to eliminate it. The cost of this law will be paid year after year, amounting to at least NIS 50 billion in the coming years, because they're talking about widening the criteria. In addition, it will pave the way for more changes in VAT, making the eventual cost more than NIS 50 billion."

The Knesset Finance Committee convened today for its second discussion of the bill promoted by the Ministry of Finance 0% VAT for those eligible to purchase a first apartment. In the first discussion last Wednesday, many objections about the wording of the bill were raised, and Minister of Finance Yair Lapid had trouble answering all the questions. The 0% VAT bill is drawing wall-to-wall opposition from both opposition and coalition members, as well as social organizations. The legal advisors of both the Knesset and the government stated that in its original form, the bill was likely to give rise to constitutional problems, mainly because of the distinction between those who served in the army or national service and those who did not. The Ministry of Finance plans to have the bill approved in the current Knesset session, due to end in early August, so that its implementation can begin in September.

Published by Globes [online], Israel business news - www.globes-online.com - on July 14, 2014

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