Netanyahu to Cut VAT, Corporate Taxes to Buoy Israel's Economy

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Finance Minister Moshe Kahlon (L) with Prime Minister Benjamin Netanyahu in the Knesset, July 27, 2015.Credit: Emil Salman

Israel will lower corporate and value added taxes (VAT) to help boost economic growth following higher than expected tax collection in recent months, Prime Minister Benjamin Netanyahu said on Thursday.

In a plan initiated by Finance Minister Moshe Kahlon, VAT will drop to 17 percent from 18 percent, while the corporate tax will fall to 25 percent from 26.5 percent.

The cut is an effort to get the country back on a sustainable path of growth after recent signs that the economy has begun sputtering. Kahlon ruled out recommendations by senior staff at his ministry that the budget deficit ceiling for this year and next be lowered instead.

Speaking at an Israel Lands Authority conference at Tel Aviv University Wednesday,Kahlon noted that the ministry has billions in surplus taxes, a situation in which the government takes in more in taxes than it is spending.

“This is the money of members of the public so it needs to be returned to them," Kahlon said.

Acknowledging that the tax surpluses don’t square with statistics bureau economic data, he said he had high regard for the agency’s work but would not dissect its numbers.