Israel is the eighth most expensive tourist destination in the world, according to World Economic Forum data cited by the Tourism Ministry. Yet a record 3.5 million tourists visited the country last year. From June 1, however, Israel is likely to become an even more expensive destination after the government lifts the exemption from value-added tax for tourists on hotel rooms, travel-related services and other goods.
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With peak tourist season starting in June, the move – one of a series of measures designed to shrink the national deficit – faces fierce opposition from the travel industry and has yet to be approved by the Knesset. If the move is approved, the Tourism Ministry predicts an increase of at least 7 percent for the average tourist in Israel and the loss of some 250,000 tourists annually.
Sipping coffee in the late spring sun outside Tel Aviv's Habima Theater, Shirlanne and her daughter Rachel Heiber from Canada say they won't become part of that statistic.
"Israel is a home away from home," says Shirlanne, 68, explaining that the pair has visited almost annually for 17 years. The move may force them to make shorter visits, however. The VAT exemption "is a big savings for us. It helps that we are able to get tax back at the airport after purchasing items over a certain amount," Rachel, 40, explains.
While she doesn't think it makes sense to tax tourists, "if that money goes toward supporting and defending Israel, then that's the price we would have to pay," she says.
Ron Heiden, 63, from South Africa, questions the proposal. "Why kill a golden goose?" he asks as he enjoys the view from a bench on the beach promenade with his wife Vera, 59. In Tel Aviv for three days following a church group tour of the country, he says the weakness of the Rand already makes Israel a pricey destination for the couple.
Nevertheless, Ron predicts, charging VAT will only harm tourism in the short term. "People get used to anything," he says.
Yago Ferrío Sambade, 27, and Santiago De Sonsa Blanco, 31, from Spain, don't predict the move will favor tourism. "Israel's socio-political context is already complicated and stops people visiting," says Sambade, although it didn't stop them. As Blanco explains, "It's an unusual destination, and we like unusual destinations."
For Martina Hafner, 43, and Ellen Ziegler, 30, from Germany, being charged VAT as tourists is a non-issue. They are used to paying tax when travelling within the EU, says Ziegler, and to high sales tax in Germany. If the exemption is lifted, Hafner says, "it wouldn't be a decider."
While the couple got a good deal on their flight and hotel room, and don't find prices in Israel unreasonable, Hafner says price-sensitive tourists would go elsewhere in the first place anyway, exemption or no exemption.
Looking for a bureau de change on Hayarkon Street by Tel Aviv's beach promenade, Russian tourist Karina Paramonova, 26, says she also doesn't object to the idea of being charged VAT. "I don't mind paying taxes – I want Israel to be rich," she says.
Jonas Arnby from Denmark has been coming here since "I was zero years old," and says VAT charges would not deter tourists like him who have "a relationship with Israel." He is Jewish and grew up with a connection to the country. It wouldn't put him off shopping, either, says the 39-year-old. "With two young kids I would never stand in line for the tax office [at the airport] anyway, it's too complicated."
Increased costs will endanger tourism from those who don't have a connection with Israel, Arnby predicts, with stiff competition from cheaper Mideast winter sun destinations such as Sharm el-Sheikh in the Egyptian Sinai desert.
"The Tourism Ministry hopes the government will reconsider and realize that this is a mistake," a ministry spokesperson told Haaretz. The move will "reduce the number of tourists, hurting the economy and the job market," the spokesperson added.
The ministry says it is already aware of cases where agents are facing cancellations because they cannot guarantee previously quoted prices. "The damage is immediate – it has names and it has numbers," the spokesperson said.
Bernard, 60, who declined to give his last name, agrees. "It's a big problem – surely there will be fewer tourists," says the first-time visitor from France, who already finds costs here high. Making his way down Tel Aviv's Rothschild Boulevard, guidebook in hand, he asks where he can get a bus to Beit Hatfutsot – The Museum of the Jewish People. "See – I take buses here because taxis are too expensive," he says.