The Israeli Knesset has given second and third readings to legislation to reduce the corporate tax rate by 1.5% to 25%.
The amendment will be published in the next few days, but the tax reduction applies from January 1, 2016. Forty-eight MKs supported the bill in its third and final reading, and 30 MKs opposed the legislation.
The Israel Tax Authority said in a statement, "The reduction in corporate tax is aimed at strengthening and encouraging growth in Israeli industry, making the Israeli economy more competitive and attractive in relation to other markets around the world, and providing incentives for investment in local production."
As far as the Ministry of Finance is concerned, the corporate tax rate reduction complements the reduction in the rate of VAT from 18% to 17% last October, part of a cut in direct taxation in an attempt to boost the rate of economic growth in Israel which has marked time around the 3% level in the past few years.
Minister of Finance Moshe Kahlon added "I welcome the approval by the Knesset plenum. In my view, reducing the tax burden, structural reforms, and cultivating investment are the horses that pull the wagon of economic growth. In the light of the surplus tax collected in 2015, we have decided on measures to reduce the tax burden. These measures will drive the wheels of growth and make Israeli companies more competitive. The collection surpluses that have accumulated belong to the citizens, and so we have decided to pay the surpluses back to them."