Israeli FinMin Lapid Slammed Over Plan to Make Tourists Pay VAT

Tourism Ministry: Cancelling value added tax exemption for tourists would make Israel one of the most expensive countries in the world.

The Tourism Ministry on Thursday slammed Finance Minister Yair Lapid's plan to impose value added tax on tourism services.

Tourists have long been exempt from VAT on various services, such as hotels and car rentals. Lapid thought to abolish this tax break..

Tourism sources argue the move would do more harm than good.

"Imposing VAT on tourism services will make us one of the most expensive countries in the world, which will significantly reduce the number of tourists," wrote Noaz Bar Nir, director general of the Tourism Ministry, in a letter to Prime Minister's Office Director General Harel Locker, Finance Ministry Director General Yael Andorn and Finance Ministry budgets director Gal Hershkovitz.

Given Israel's geopolitical problems, he added, the country can't afford to further turn off potential travelers.

According to the World Economic Forum's 2012 report on global tourism competitiveness, Israel ranked 133 out of 140 countries in terms of how much it costs to visit – meaning it's one of the priciest vacations that a traveler can take on the planet.

"Prices in Israel are expensive primarily due to taxation and regulation that don't exist in other OECD nations," Bar Nir added. His ministry has been campaigning heavily for the government to lower tourism costs; imposing VAT will severely undermine that.

Adding the 17 percent VAT on tourism services will make a trip to Israel cost 6.3 to 7.4 percent more than it does now, Bar Nir said, and reports have shown that this will cut the number of tourists visiting annually by somewhere between 240,000 and 270,000.

Tali Meir