Prime Minister Binyamin Netanyahu and Finance Minister Moshe Kahlon announced Thursday they will cut the sales tax (VAT) by one percent and do the same with the corporate tax.
Beginning October 1, the VAT will drop from 18 percent to 17 percent.
The corporate tax will drop from 26.5 percent to 25 percent, starting in January 2016.
It is estimated that the two benefits to consumers will cost the state approximately NIS 6.5 billion ($1.6 billion).
Bank of Israel Governor Karnit Flug, who is not in favor of the plan, immediately announced her criticism of the move.
But in a joint news conference Thursday afternoon, Netanyahu and Kahlon told reporters the move was designed to act as a “growth engine” on an economy that is slowing down.
“We believe in you, we believe in the free market, we believe in freedom,” the prime minister said. “I think this will help growth. I think this will give the economy the boost it needs. At a time when we are hearing about global slowdown, and here too, we want a growth engine and lowering taxes is one of them.”