The decision by Finance Minister to remove VAT exemption on tourists has received criticism from Israel tourism. The tour operators have warned the govt that VAT will reduce tourism by 14 per cent.
Israel Incoming Tour Operators Association has said that the move by Finance Minster will cost the nation around 250,000 to 300,000 foreign tourists and 7000 jobs.
The views of association are backed by the Tourism Ministry. Making tourists pay 18 per cent tax will not be healthy for the tourism industry. Tourism Minister of Israel has said that, VAT will cost NIS 1.7 billion to the economy of Israel; therefore FM should reconsider his decision.
The budget draft mentions that overall burden on the tourists will increase by 3.1 per cent only. There will be relief for tourists in form of cheap airfare thanks to the Open Skies reform and some of the VAT will be absorbed by the hotels.
While in short term tourism may come down by 6.5 per cent but it will gain momentum once again in couple of years.
But the industry is not buying that argument. The impact would be much deeper than expected in the budget draft. It is already 20 per cent more expensive for the British and European tourists.
The tour operator association has also pointed out that drop in tourist arrivals is not only going to hurt hotels but all the tourism related businesses like restaurants, amusement parks, museums, shopping etc.
The association further pointed out that traveling to Israel is already very expensive and unlike other destinations, Israel is not seen as a safe place to visit. Imposing 18 per cent VAT will have severe impact. Tourists will ignore Israel.