While the Finance Ministry expects billions in revenue, experts say the estimate is inflated.

By Batya Jerenberg, World Israel News

Finance Minister Bezalel Smotrich has received strong pushback to a recent proposal to cancel the VAT exemption for tourists, with top industry figures warning that such a move would backfire on the country, Ynet reported Tuesday.

Smotrich wants visitors to pay the extra 18% that locals must on such things as hotel rooms, car rentals and other specific goods and services in order to enrich government coffers.

He said that in exchange for removing this benefit, the government would present a broad plan to develop the tourism industry throughout the country.

The report said that the Finance Ministry has calculated that such VAT payments would add up to NIS 2.5 billion per year.

By contrast, tourism experts say that the potential gain would be less than a third of that — NIS 750 million.

This number is based on the fact that tourism to Israel has plummeted over the past several years due to the COVID-19 pandemic travel restriction that was followed so closely by the two-year war against Hamas, Hezbollah and Iran, which only conditionally ended last month.

While 2019 saw a record 4.5 million entries into Israel, barely 1.2 million came in total during the COVID years (2020-21).

The numbers rose during 2022 and 2023 to over 3 million, but with the War of Revival breaking out in October 2023, tourists again disappeared, with fewer than 1 million coming in 2024.

Government figures earlier this month projected only 1.4 million tourist entries for 2025.

These numbers show that it takes time for visitor confidence to rise, and the industry believes that canceling the VAT exemption will just discourage future tourists who might want to come to help Israel recover after the war.

Yossi Fattal, head of the Inbound Tourism Organizers’ Bureau, attacked the idea, telling PassportNews Wednesday that the Finance Ministry was basing its proposal on “economic works from 2008 and 2011,” which were both “irrelevant” and “misleading.”

In 25 out of 27 EU countries, he added, tourists receive either a total tax exemption or a reduction.

“The Ministry of Finance is managing the tourism sector with the intention of deliberately destroying it, in complete contradiction to the policy and a series of decisions made by Israeli governments according to which the incoming tourism sector carries important strategic value for the State of Israel,” he charged.

When contacted, Tourism Minister Haim Katz had a four-word reaction: “It will not happen.”

Similar initiatives were shot down in 2009 and 2013 due to pressure from the tourism industry.

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‘We do not repeat mistakes and concepts that we paid dearly for’.

By JNS

Israeli Finance Minister Bezalel Smotrich on Wednesday rejected calls to reverse his decision to withhold tax revenues from the Palestinian Authority.

“I hear that there are those who think that while our heroic soldiers and commanders are sacrificing their lives for the defense of the homeland, we should transfer money to this despicable enemy in Judea and Samaria,” the minister tweeted.

“We do not repeat mistakes and concepts that we paid dearly for.”

His comments came after a report on Tuesday in Axios that the Biden administration “expressed alarm” after Monday’s announcement by Smotrich that he instructed the Finance Ministry to halt the transfer of funds to the P.A.

Smotrich also urged the Cabinet to reconsider its policy of transferring money to Ramallah, due to “senior P.A. officials’ support for the horrific massacres of the Nazi terrorist organization Hamas.”

In a letter to Prime Minister Benjamin Netanyahu, he listed 12 inflammatory statements P.A. officials made in the wake of Hamas’s Oct. 7 slaughter of more than 1,400 persons in Israel. The terrorists also wounded more than 5,000 others and took over 200 hostages back to Gaza.

“The P.A. has once again proven the fact, about which we have been raising our voices for years, that it is a terror-supporting organization,” Smotrich wrote in the letter.

“Therefore, beyond the connection of these funds to the Gaza Strip and its residents, these funds are used for activities against the State of Israel and its citizens. It is inconceivable that in this reality we will continue to transfer these funds as if nothing has happened.”

U.S. Secretary of State Antony Blinken on Tuesday told the Senate Appropriations Committee that the administration asked Israel to release the money to the P.A.

“The Palestinian Authority is doing everything it can to keep security and stability in the West Bank. It is vastly under-sourced. This is another aspect of the problem,” Blinken said.

U.S. officials asked Netanyahu’s office and Strategic Affairs Minister Ron Dermer for clarification on Smotrich’s decision, according to the Axios report.

“We told them that such a move undermines the Palestinian Authority and the stability in the West Bank and goes against Israeli interests. We can’t just let everything collapse,” a U.S. official said.

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