Israel concedes reduced VAT rate

The ruling Israeli government has agreed to zero rate VAT on public transport and key basic foods to secure agreement on the latest budget.

The concessions were demanded by the government’s coalition partners, including Shas, last week to secure the passage of the latest bi-annual budget. Failure to pass the final budget would result in the collapse of the government.

The food now enjoying the zero-rating includes milk and bread. Public transport is currently subject to 17% VAT. The new measures will come into effect from 1 January 2016.