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Israel plans to cancel Value Added Tax exemption for tourists

By Mason White 1:22 PM May 3, 2013
Tourists enjoy Israeli beach 

By: David Ross
The good old days for tourists who were used to being exempt from paying any taxes in Israel, are over, according to a statement released by the Israel Ministry of Finance.

Tourists to Israel will soon be paying taxes on hotel stays and services, transportation, car rental and shopping, after being exempt from paying such taxes for many years.

Finance Minister Yair Lapid intends to cancel the VAT exemption for tourists, a move projected to raise 300 million to 500 million shekels for the state every year.

Previous attempts to remove the exemption failed, after opponents of the move argued that it would damage the tourism industry.
However, since the massive state deficit creates pressure to reduce spending, the government is looking for ways to increase revenue in order to reduce planned cuts.

Finance Ministry officials have also had their eyes on the exemption from VAT on fruits and vegetables, but the difficulty of enforcement in outdoor markets are said to have stalled efforts on that front.

“I think it is only fair that tourists, who enjoy the great services Israel has to offer, pay their fair share. After all, the United States, which also enjoys a huge tourism industry, has no tax exemption for tourists. I don’t believe that canceling the VAT exemption will hurt tourism at all,”

VAT is currently at 17 percent and it might be raised to 18 percent.