Foreign tourists visiting Israel may soon become subject of the requirement to pay the value-added tax (VAT), as the country is planning to end the exemption that applied to international visitors.
According to the national economic plan issued by the finance ministry, foreigners visiting Israel currently don’t have to pay the 17 per cent VAT on services related to tourism, including hotel accommodation and services, transportation, hospitalization, and car rental among other services, VisaGuide.World reports.
However, the move that is expected to change, can make tourism services more expensive for local tourists and damages domestic tourism, as the annual cost of the exemption is estimated to reach 2 billion shekels, which is equal to $567 million.
By canceling the value-added TAX exception, the number of tourists would be down by two percent while the real GDP is expected to increase by nearly 300 million shekels, which is equivalent to $84 million. The new measure is part of the country’s plan for 2023 and 2024 and has yet to be approved by the government and the parliament.
More specifically, the plan will be up for voting by the government on February 23, as the finance ministry pointed out, and after that, it will be submitted to the parliament for four rounds of voting, with the final one expected to be on May 29.
The new national plan aims to increase economic growth, lower home and essential prices and promote energy and transport projects.
One way to work towards economic growth is by investing more in tourism, which does bring large sums to national economies.
According to the local media, over two million people visited Israel between January and October of 2022, with another 500,000 potentially reaching the country by the end of the year. However, these figures are considerably fewer than those recorded in 2019 when a total of 4.5 million tourists were recorded in Israel.
Furthermore, data by CBS, the Central Bureau of Statistics, 19.3 million overnight stays were recorded during eight months of the year, compared to 21.8 million over the corresponding time of 2019.
In addition, hotel occupancy during 2022 was estimated at 61 percent compared to 70 percent in the corresponding time of 2019. Foreign tourists spent 5.6 million overnight stays, representing 29 percent, while domestic tourism accounts for higher numbers – over 13 million overnight stays.
The difference between international and domestic tourism was less evident in 2019 as ten million overnight stays were recorded by foreign tourists and 12 million by locals.
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