Keeping kosher: it may be
bad for your economic health
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[November 03, 2016]
By Ari Rabinovitch
(Reuters) - Behind Israel's food and tourism industries thrives a
parallel economy run by rabbis and a legion of inspectors whose business
it is to make sure everything is kosher.
Since most Israelis prefer knowing their food is prepared according to
Jewish custom, hotels, restaurants and manufacturers have little choice
but to go along with the arrangement - adjusting their kitchens,
modifying ingredients, and paying a fee to get a must-have kosher
But new data shows the system is weighing on the economy, draining
productivity, pushing up prices and allowing large cash balances to
accumulate off the books, angering tax authorities.
Roni Hamama tends to bang on the table when describing his dealings with
the kosher network. He owns five stores around Israel that sell roasted
nuts and seeds. Each outlet falls under the jurisdiction of a different
"With each store it's a different battle, every store has to follow
different rules," said the businessman, giving the table another bash.
"You become a hostage to all the demands."
Even though most Israelis are secular, it is estimated that about 70
percent of Israeli Jews want access to kosher food.
To help maintain the delicate status quo between Israel's Orthodox and
non-observant Jews, the government has effectively given the rabbis free
rein to administer the kosher regime as they see fit, with oversight
from the Chief Rabbinate.
Over the years the system has grown so tangled that the OECD, a club for
developed countries, recently singled out Israel's "religious dietary
rules" as helping to "hamper the functioning and efficiency of the food
and retail sectors, which is in turn contributing to the weaker
economy-wide productivity growth in Israel."
At the top of the kosher economy sits the Chief Rabbinate Council, a
government-backed body with wide-ranging authority, overseeing all
Jewish rituals from marriage to circumcision. It has a monopoly on
declaring whether food-related businesses - from wedding halls to sushi
restaurants, in-flight airline coffee to wineries - operate in
accordance with Jewish law.
Several thousand inspectors - it is not clear exactly how many - make
onsite visits daily to check things like food sanitation, the separation
of dairy from meat products and that materials are bought from suppliers
who are also approved.
It even sends delegations abroad to inspect slaughterhouses that export
beef to Israel.
For more devout consumers, a seal-of-approval from specific rabbis not
connected to the chief council is needed, and dozens of private groups
have popped up offering competing, extra-special-kosher certificates.
This has a created a situation where, according to one official, 17
inspectors every day descend upon a single food court in Jerusalem's
main mall, all at the expense of the business owners, who pass on costs
Fees vary, but the owner of a falafel stand could pay about 1,500
shekels ($394) a month for kosher approval.
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Kosher inspector Aaron Wulkan examines display refrigerators
containing meat in a food store to ensure that the food is stored
and prepared according to Jewish regulations and customs in Bat Yam,
Israel, October 31, 2016.REUTERS/Baz Ratner
Nationwide, that adds up to about 2.8 billion shekels ($730 million) a
year, accounting for 2.2 percent of turnover in the hotel industry and
as much as 2 percent of all food services, according to a draft report
by Israel's Finance Ministry.
"It's not work being done against keeping things kosher, it's against
the way the system is set up today," said Maayan Nesher, a finance
ministry official involved in the report. "We think the public should
not have to pay for those extra costs."
OFF THE BOOKS
Those running the kosher network say the inefficiency figure of around
600 million shekels a year is much lower - closer to 30 million shekels.
And the inspectors, they say, work with the business owners to make the
process as smooth as possible.
"Our interest is that the maximum amount of businesses will be kosher,"
said Oded Fluss, director-general of the Ministry of Religious Services,
which oversees the Chief Rabbinate. "If costs are too high, they will
simply say 'forget it'."
But there is room for improvement, he acknowledged.
To cut out frivolous costs and possible corruption, his office is
pushing for more uniformity among rabbis in their enforcement of the
religious laws, and it is developing a digital database to track
suppliers within the network.
The dozens of smaller, private authenticators, however, do not answer to
the Chief Rabbinate. They set their own standards and prices and no one
knows exactly how much money they make.
Israel's State Comptroller, an official watchdog, issued a report in
2014 saying that "hundreds of millions of shekels" are changing hands
among those smaller groups. It described frequent tax avoidance and even
cases of suspected money laundering.
The Tax Authority has promised to crack down, issuing a warning earlier
this year that it would seek out this hidden revenue, and has already
begun its intelligence gathering.
(Editing by Luke Baker and Richard Balmforth)
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