According to the finance ministry’s comprehensive national economic plan, Israel planned to end the VAT exemption for foreign tourists visiting the country.
According to the ministry, the exemption currently covers a range of tourism services and makes tourism services more expensive for local consumers, which harms domestic tourism.
The move is part of a wider national plan that aims to boost growth, reduce home and goods prices, and promote energy and transport projects.
VAT Exemption for Foreign Tourists
Currently, foreign tourists visiting Israel are exempted from paying the 17-per cent VAT on a range of tourism services, including hotel accommodation, car rental, transportation, and hospitalisations, among others.
However, the finance ministry has proposed cancelling this exemption, citing its negative impact on local consumers and domestic tourism.
Benefits of Cancelling the Exemption
According to Xinhua, cancelling the exemption would reduce the number of tourists by only 2% while increasing real GDP by approximately $300 million shekels ($88 million). The exemption is estimated to cost the state approximately 2 billion shekels ($567 million) per year.
The decision is part of a national plan for 2023-2024 and must be approved by the government and parliament.
National Economic Plan
According to the finance ministry, the national economic plan aims to boost growth, lower home and goods prices, and promote energy and transportation projects.
The plan will be submitted to the government for approval on February 23, and then to parliament for four rounds of voting, with the final round scheduled for May 29.
The repeal of the VAT exemption for foreign tourists visiting Israel could have a significant impact on the country’s tourism industry and economy. While it is only expected to reduce the number of tourists by 2%, it has the potential to increase the country’s real GDP by $88 million.
This proposal will be included in the government’s national economic plan, which will be voted on in the coming months.