Value-added tax in Israel was lowered by 1% yesterday, in order to “return extra collected taxes to the public.”










Photo Credit: Reuters/Channel 2 News

Israeli Finance Minister Moshe Kahlon and Prime Minister Benjamin Netanyahu have decided to cut the value-added tax by one percent. As a result, it now stands at 17%.

The immediate result of this move is a lower monthly spending account. It will mostly be felt in bill payments, gas prices, clothing expenses and car prices.

The average Israeli family, for example, whose monthly expenses add up to 12 thousand shekels, is expected to save 100 shekels a month after the deduction of products that do not have a value-added tax, like vegetables. The average family would be saving 12 hundred shekels a year if the policy is not changed again.

Kahlon and Netanyahu explained that the reason behind the move was billions of shekels of extras of tax-collecting money. They claim they wished to encourage economic growth and therefore they lowered the tax.

Kahlon announced the tax cut and stated that the move would enable the treasury to return the extras to the public. He explained the extra money is also a result of recent improvement in the Tax Authority’s collecting system. The Tax Authority stated that the new VAT rate would apply on products distributed from yesterday going forward. In addition, products that have already been paid for but will be delivered to the client later on will also enjoy the new policy.