Israeli bus (Illustrative).
(photo credit: BEN HARTMAN)
Advancing legislation aimed at keeping public transportation travel affordable, the cabinet approved for coalition support on Sunday a bill that would keep bus fare changes entirely disconnected from fluctuations in value-added tax.
In addition to shielding future tariffs from rises in VAT, the bill involves a one-time, 17-percent reduction in the amount of VAT charged with fares today, the Finance Ministry said. The drop in tariffs amounts to about NIS 650 million annually, a sum that the government intends to subsidize.
The bill, proposed jointly by Finance Minister Moshe Kahlon and Negev and Galilee Development Minister Arye Deri, will save families thousands of shekels each year, according to the latter.
“This a huge reduction in tariffs that will be brought for expedited legislation in the Knesset, in order to ensure that it will not be repealed in the coming years,” Deri said.
Kahlon, meanwhile, described the bill as a critical step in the “struggle against the cost of living in Israel and helps first and foremost the lower and middle classes.
“The solution that we reached together with Minister Deri allows us to preserve the uniform VAT system without impairing Israel’s tax system, while ensuring that the reduction will remain for years to come,” he added.
The approval of Kahlon and Deri’s bill to dissociate VAT changes from ticket fares occurred just a week after a massive overhaul to other public transportation pricing mechanisms came into force. As of January 1, a Transportation Ministry reform enabled Rav-Kav multi-fare cardholders to take advantage of new subscriptions that integrate various modes of travel, offering discounted packages based on designated destination zones.
Passengers can now purchase daily, weekly and monthly passes at reduced costs within the Tel Aviv, Haifa, Jerusalem and Beersheba metropolitan areas.
The Transportation Ministry’s hope is that the increased system flexibility will spur more travelers to choose public transportation over their private cars.