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Prices Rise in Israel Following Adoption of New Government Budget

February 16, 1966
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A wave of new increases in prices and demands from agriculture and industry sources for permission to boost still unaffected prices was the initial response today to Israel’s record new budget, adopted last night by the Knesset, Israel’s Parliament, which involved higher taxes.

Interurban road transport companies, which provide most of the transport for Israeli travelers, increased their fares five to six percent today to cover new taxes on motor fuel and have applied for permission for still further fare increases. Tnuva, the major agricultural distribution company, notified the Government that motor fuel tax increases were directly increasing agricultural production costs. Tnuva demanded that such prices be reexamined. Zalman Suzeiev, president of the Israeli Industrialists Association, expressed the concern of industry over the new taxes and stressed that a general price increase was inevitable.

As the Israel Tariff Commission prepared to consider the demands at a meeting Sunday, it appeared that transport fares would be readjusted by 15 to 17 percent and that prices of some other services probably would be increased. The pressures were expected to bring a general upsurge in the cost of living despite a pledge today by Trade and Industry Minister Haim Zadok that the Government would try to minimize the anticipated increases as much as possible.

The average Israeli appeared today to understand the need for the Government’s anti-inflationary action but residents of Tel Aviv’s poorer districts held an “emergency” meeting to protest against the tax increases, particularly in municipal taxes.

Steep price rises for meat products also followed announcement of the new budget. Cigarettes and liquor prices rose 20 percent. Gasoline prices rose 30 to 40 percent and diesel fuel prices were raised 150 percent. Previously, there had not been any tax on diesel fuel.

Taxes on automobile spare parts went up from 35 to 80 percent and taxes on imported trucks were boosted by the same percentage. Taxes on services were extended to automobile rentals, clubs and service guarantees on electrical appliances.

Income tax boosts ranged from the equivalent of 13 cents more on monthly incomes of $200 to eight dollars more on monthly incomes of $500. Company income taxes were raised from 28 to 30 percent. Postal services charges and all license fees will also be increased.

Aharon Becker, secretary-general of Histadrut, warned yesterday in an address to the executive committee of the Histadrut that, if wage restraints are not maintained, there will be inflation and “ultimately unemployment. “

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