In an effort to stimulate a flat economy, the Israeli government has proposed a reduction in Value Added Tax to 17%. The indirect tax rate cut, which could boost consumption, would be implemented with a reduction in corporate income tax to 25% from 26.5%.
There is some dispute about the ability of the country to support a tax reduction. The government claims that larger than expect tax revenues warrant the changes; however the Central Bank is less confident.
Israel’s growth slowed in the second quarter of 2015.
Israela’s VAT rate rose from 15.5% to the current 18% between 2010 and 2013. There had been a plan to reduce it back to 17% in 2014. In April this year, the government backed away from a promised to cut VAT on foods.