The cabinet today approved an initiative by Minister of the Development of the Negev and Galilee and Periphery and Shas Party chairman Aryeh Deri for exempting public transportation from VAT. Following vigorous opposition to the measure by the Ministry of Finance, a watered down version was approved authorizing Minister of Finance Moshe Kahlon and Deri "to implement the August cabinet resolution concerning implementation of the coalition agreement with Shas concerning financing for 0% VAT for public transportation, water, and electricity for the economically disadvantaged in an optimal manner by January 1, 2016." Deri's original demand was to anchor 0% VAT in a fast-track legislative process in order to ensure that the Ministry of Finance would not attempt to alter the exemption.
After cabinet approval, Deri said, "I'm glad that this decision was taken. I promised, and I'm keeping my promise. I promised 0% VAT on basic products, and these products are extremely basic. The decision will benefit mainly the economically disadvantaged and those we have to help. I want to thank Prime Minister Benjamin Netanyahu and Minister of Finance Moshe Kahlon for supporting the decision."
Sources inform "Globes" that Netanyahu met yesterday to Governor of the Bank of Israel Karnit Flug and leading Ministry of Finance officials, who told him that they opposed lowering VAT on transportation. Ministry of Finance budget director Amir Levy presented Deri with a number of alternatives to a VAT exemption, including an across-the-board cut in public transportation fares quantitatively equivalent to a VAT exemption, but Deri rejected all the proposed alternatives.
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2015
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