ISRAEL – Israel Finance Minister Bazalel Smotrich, has announced the lifting of the 40% customs duty on imported milk for 3 months to combat shortage across retail chains.

The order will remove the 40% customs tax currently levied on milk effective until October 9, to encourage cheaper imports, which have been economically unviable.

“Lowering the duty is the right step since it is the fastest way to fill the gap and eradicate the milk shortage that we see on the shelves in our supermarkets,” Smotrich said.

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

 He further noted that It also would not hurt dairy farmers, since the dairies will continue to buy the existing milk quotas at the existing target price.

According to Smotrich, the recent milk shortage comes after the price of regulated dairy products rose over 9% in May, when Smotrich reached a last-minute agreement with dairy manufacturers for the expected 16% increase to be spread out across a number of years.

Dairy producers have been complaining that the price of food grains for cattle that account for a significant part of the cost of producing dairy items has jumped, raising costs.

It remains to be seen if importers will find it worthwhile economically and logistically to bring in milk for a limited time period, considering that the cost of kosher certification has to be factored in.

Milk production in Israel is subject to centralized 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.

In addition, Israeli media reported that milk imports would likely come from Poland, Hungary, and other Eastern European countries, where milk prices are at least 30% 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

Israel regulates the price of a number of key locally produced dairy products including milk, soft white cheese and basic bread, which are more expensive than in European countries.

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