In order to make up some of the deficit in Israel, one proposal is to levy VAT (Value Added Tax) on all purchases made by tourists in Israel. Currently, tourists are exempt from VAT on purchases of products and services. The current VAT rate for locals is 15.5% (but this may soon go up to 16.5%).
Yesterday, Globes reported that, according to the Tourism Minister, Israel will net about NIS50 million next year as a result of this proposal. However, he stated that the GDP will lose about NIS2.4 billion due to loss of jobs, as tourists look for cheaper alternatives to coming to Israel for a vacation. This will also mean a loss of 290,000 visitors and 12,000 tourism related jobs.
This got me thinking. How many times do we make a decision for the short term benefit of our company, maybe just to hit a quarterly goal? Do we think through how this may impact the long term health of our business?
I believe that it was Lou Gerstner, former CEO of IBM, who said that he would not go back to working for a public company, due to the impossible task of reporting quarterly numbers and the long term health of the company.
Think about the pros and cons of each decision. Yes, a price cut may get you a deal this month, but when other clients find out that you succumb to pressure, can you possibly demand higher prices from them? Does that change the average transaction size for your deals? Does that mean you have to sell more units? Does that mean hiring more people to still net the same amount of revenue? How does that impact your business plan?
Obviously, this is just a simple example, but each short term course change can be very damaging to the long term health of your corporation.
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