The drought tax, aimed at conserving water, is headed for a freeze. Deputy Minister of Finance Yitzhak Cohen today told “IDF Radio" (Galei Zahal) that the government was considering cancelling the tax. In the interview, he used the past tense to refer to it.
Cohen said, "The drought tax was not the end, but the means to an end to achieve a 20% reduction in water consumption, which is a lot. The objective wasn’t to generate tax revenues. Now that the situation has improved, we're reviewing the situation with the Water Authority."
A source at the Ministry of Finance spoke to "Globes" in a similar vein, saying, "We clearly said that if there was a wet year, we'd consider cancelling the drought tax. The minister of finance has been saying this all along. The Water Authority is the professional body that will decide when there has been a wet year."
The 2009-10 state budget includes a clause that households will pay NIS 20 per cubic meter of water above a 16-cubic meter quota. The quota is raised proportionally to the number of members of a household. Although the Ministry of Finance has said that the drought tax revenues were not aimed at reducing the budget deficit, it was expected to generate between NIS 800 million and NIS 1.2 billion in revenues a year.
A decision by Prime Minister Benjamin Netanyahu on whether to cancel the drought tax will likely be related to the battle being waged by MK Ronit Tirosh (Kadima) under the slogan, "Bibi will fold - cancel the drought tax", which has won support across the political spectrum.
The difficult task of climbing down from the drought tax tree has been imposed on Prime Minister's Office director general Eyal Gabbai, who has to coordinate all the parties involved: the Prime Minister's Office, the Ministry of Finance, the Ministry of National Infrastructures, and the Water Authority.
Meanwhile, the ministerial committee on legislation today rejected a bill to cancel the drought tax submitted by MK Dalia Itzik (Kadima).
A senior official at the Prime Minister's Office told "Globes", "The possibility of cancelling the drought tax has been under consideration for a long time with the Ministry of National Infrastructures, and we will coordinate with it on the basis of conclusions reached."
Alternatives to an outright cancellation of the drought tax include lowering the tax to the level in the original proposal in the state budget bill.
The Prime Minister's Office said in response, "The issue of water rates and the drought tax has been under consideration for a long time with the Ministry of National Infrastructures, but no decisions have been taken yet. When they are, we'll act jointly with the Ministry of National Infrastructures to implement them."
There are also disagreements within the Ministry of Finance over the drought tax. A press release from Minister of Finance Yuval Steinitz's office said today, "The minister of finance has submitted no proposal at no time to cancel the drought tax, but has reiterated his position that from last summer that if the winter is especially rainy, a review of the tax and its format will be conducted at the end of the rainy season."
Published by Globes [online], Israel business news - www.globes-online.com - on November 8, 2009
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