Gov't Mulls Marking Israel's 60th Anniversary With Tax Cut

Plan would cut sales tax 0.5 percent if accepted, in addition to income tax cuts for the years 2008-2012.

The Prime Minister's office and the Finance Ministry is examining the possibilities of implementing a tax reduction beginning on Independence Day as a gesture to Israel's residents in honor of the state's 60th anniversary.

The plan would call for lowering the sales tax from 15.5 percent to 15 percent and an additional income tax reduction for the years 2008 to 2012, to be announced later.

The Tax Authority is reportedly more interested in a regressive tax, which would favor greater tax relief for the stronger economic sectors of society.

A temporary sales tax would be a relatively easy move for the state to absorb, with a 0.5 percent sales tax estimated to cost the state only NIS 1.5 billion in annual revenue.

The tax reduction has been discussed feverishly in the Treasury and the PMO, with Bank of Israel Governor Stanley Fischer also consulting both offices on the feasibility of the move.

The main considerations against the move are fears that it will drastically affect the state's ability to meet tax collection goals of NIS 190 billion for 2008, as well as the reported opposition of the Bank of Israel.