Israel lifts tax on imported milk to end shortages

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Israel’s finance minister Bezalel Smotrich is cancelling the 40 percent customs duty on imported milk for three months to combat a shortage across supermarket chains.

Milk production in Israel is subject to centralised planning and government-approved quotas. Since milk prices are set by the state, dairies have been reluctant to boost output and prefer to focus sales on dairy products that are not government-controlled, leading to milk shortfalls.

State-controlled milk prices rose in May, adding to the cost of living pressures.

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The customs-duty pause will not hit state tax revenues, Smotrich said, since there are no current milk imports due to the prohibitive 40 percent tax level.

It also would not hurt dairy farmers, since the dairies will continue to buy the existing milk quotas at the existing target price, he said.

The tariff cancellation will be in effect until October 7.

Three local companies control most of Israel’s milk market, and farmers have been vocal in their opposition to opening up the dairy market to imports, a throwback to Israel’s socialist roots.

“Lowering the duty is the right step since it is the fastest way to fill the gap and eradicate the milk shortage,” Smotrich said. “Too many times we have seen a shortage of milk on the shelves. This is a reality I am not ready to accept.”

Israeli media reported that milk imports would likely come from Poland, Hungary and other Eastern European countries, where milk prices are at least 30 percent lower than in Israel.

Smotrich also said he intends to expand the quota of foreign workers for agriculture and reduce their cost, given the shortage of workers in the sector, while the state already invests hundreds of millions in direct support for farmers.