Plan for VAT on tourism causes shivers

Levy on hotel stays, car rentals could repel 290,000 tourists, ministry says.

June 18, 2009 21:43
2 minute read.
Stas Misezhnikov 88 248

Stas Misezhnikov 88 248. (photo credit: Ariel Jerozolimski)


Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

Imposing a value added tax on tourism services will lead to a 12 percent drop in incoming tourism and 11,600 workers will lose their jobs, the Tourism Ministry said Thursday. "The imposition of VAT on incoming tourism services is a foolish move that will result in thousands of people losing their jobs," Tourism Minister Stas Meseznikov (Israel Beiteinu) said. "It is another blow for the tourism industry in Israel, which is already struggling due to the global economic crisis." Israel Beiteinu threatened to vote against the 2009-2010 draft budget, which passed its first reading on Wednesday, unless the proposed VAT levy is removed from the Economic Arrangements Bill. Incoming tourists currently are exempted from paying VAT on tourism services such as hotel stays and car rentals. The additional VAT would increase the price of holiday packages by an estimated 16.5%, result in 290,000 fewer tourists (a drop of 12%) and lead to 11,600 workers losing their jobs, the Tourism Ministry said is a statement. Proponents of imposing VAT on tourism services say it would generate NIS 500 million for the state coffers. In response, the Tourism Ministry said the revenues generated would be offset by having fewer incoming tourists who buy taxable products and increased unemployment benefits for laid-off tourism workers. "The proposed VAT levy could also endanger the image of Israel as an attractive tourism destination," the ministry said. "Since the proposal has been made public, we have had many requests from travel agents and tourism marketing representatives we work with who announced that they would stop to market Israel if there is a price hike on holiday package deals to Israel." The tourism industry is a potential growth engine for the economy, since for every 100,000 incoming tourists, about 4,000 jobs could be created, contributing $210m. to gross national product, the ministry said. "The VAT levy is threatening the tourism potential and the target of bringing five million tourists to Israel by 2015," the ministry said. "Due to the global economic crisis, the tourism industry in Israel is competing fiercely with other countries and cheaper destinations." The Tourism Ministry expects incoming tourism in 2009 to fall by 20% year-on-year due to the global economic crisis. In addition, the industry is struggling to maintain its competitive position because of high costs for energy, water and food and geopolitical risks. International passenger traffic fell 15% in May compared with the same month last year, according to the Israel Airports Authority.

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection