Lowering the V.A.T. Tax

PM Olmert and FM Hirschson have decided to sign off on lowering the V.A.T. Tax from 16.5% to 15.5% right away. No need for haggling with other ministers and no need for voting. They just did it.

I am all for doing anything that lowers my bill at the supermarket. I will now save money when I buy anything, right? I hope so, but I am not optimistic. I am waiting to actually see the prices go down before I get too excited. Stores and service providers have the uncanny ability to raise prices when necessary, yet we rarely see them lowering prices.

For example, in my city of Bet Shemesh there is a very useful road that had been opened connecting RBS to Gush Etzion and the other side to the main entrance to the city through the Industrial Zone. The road was beneficial to RBS residents in that we no longer had to use the circuitous main highway #38 with all its traffic jams, but could drive on a nice, new, wide road and get to the entrance to the city faster, along with the train station and other locations on that side of town. A taxi to RBS from the train station cost 20 NIS. Lo and Behold the city had to close the road for reasons unknown for an undisclosed amount of time. The taxi companies got together and raised the price of a ride to RBS. It is now 25 NIS. They claim it is necessary because they have a longer drive now because they have to take the 38 road. OK, I guess that is reasonable. Sure enough, eventually the new road was re-opened for traffic. Yet the price of the taxi ride remains at 25 NIS. When confronted the taxi drivers are very blunt and straightforward that prices never come down so fast.

So, will the prices in the supermarket come down now that taxes have been lowered or will the supermarkets owners (and all other stores and service providers) pocket the extra 1% as additional profit? We will soon see. It goes into effect July 1.