It would be a real shame if VAT were to be applied to the hotel stays of overseas guests - hotels in Israel are already regarded as very expensive and this is one of very few tangible incentives available to overseas visitors to Israel. If it really is impossible to continue this incentive, maybe the government could introduce a reduced rate of VAT - say 5% - and apply this to ALL stays - Israelis and foreigners alike?
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Russia: U.S.-Georgian military exercises could destabilize Caucasus region (Reuters)
from the article: Tourists to Israel may have to start paying taxes on hotels and services