Tourists to Israel May Have to Start Paying Taxes on Hotels and Services

Lapid plans to cut VAT break for holiday-makers on vacation in Israel, a benefit in Israel that not all Western countries offer.

Spreading the burden apparently applies to tourists, too: Finance Minister Yair Lapid intends to cancel the VAT exemption currently in place for tourists. The move is likely to bring another NIS 300 million to NIS 500 million into state coffers annually.

Currently, tourists pay no VAT on hotel stays and related services, transport, car rentals and large purchases. The policy has been in place for several years.

There were previous attempts to drop this exemption, which not all Western nations offer. However, the initiatives were abandoned amid arguments that this would discourage tourism, as Israel is already an expensive country for tourists.

However, the government is desperately looking for ways to cut the national budget and boost revenues.

Another notion that has crossed minds in government more than once is to abolish the VAT break on fresh fruit and vegetables. One obstacle to this idea is the difficulty in enforcing the change, if it is made, in the open-air markets.

VAT is presently 17%, and unlike sales tax in many American states, is included in the price at regular stores. Another notion crossing many a mind in government, in order to increase the state's tax revenues, is to hike VAT to 18%.

Emil Salman
Asaf Pincho
Ofer Vaknin