Prime Minister Netanyahu announced the cancellation of plans to impose a 16.5 percent VAT on the purchase of foreign tourist services in Israel, as raised by the budgetary department of the Treasury as part of the Economic Law of Arrangements. Earlier Netanyahu had agreed to waive the addition of VAT on fruit and vegetables.

Eli Gonen, president of the Israel Hotels Association, said, “I hope that for the time being, tourism will receive the appropriate treatment and will contribute to the country’s employment and revenue.”

To the dissatisfaction of the Treasury, Prime Minister Netanyahu cancelled their recommendation for the imposition of a 16.5 percent VAT on the purchase of foreign tourist services in Israel. The heads of the tourism industry, who fought stubbornly against the proposal, were able to breathe a sigh of relief and said that the Prime Minister has made the correct decision at a time when the number of foreign tourists coming to Israel was falling.

In an announcement, Mickey Federman, chairman of the bureau for coordinating the tourist industry, and Eli Gonen praised the Israeli government, the Minister of Finance Yuval Steinitz, and especially Minister of Tourism Stas Misezhnikov on the decision to remove the imposition of VAT on incoming tourist services from the Economic Law of Arrangements.

“Those of us representing the tourism industry greatly appreciate the decision of the government for understanding that the imposition of VAT at this time, would cause great damage to the tourism industry. I am very hopeful that without the VAT restriction, the tourism industry will return towards growth and will contribute to the revival and growth of the economy,” wrote Federman.

Federman indicated that during recent weeks, while steps were being taken against imposing VAT, the heads of the tourism industry had been delighted to discover the commitment of Minister of Tourism Misezhnikov against the decree.

Since the Treasury’s proposal to impose VAT on incoming tourist services, as part of the Economic Law of Arrangements, the heads of tourism have waged a widespread media campaign against the tax. They claimed that the addition of VAT would irreperably damage the ability of Israel to compete in the world and would not add any revenue to the country as forecast by the Treasury.