Accountant General: Eilat Doesn’t Need VAT Exemption Anymore

Eilat has had its setbacks in recent months, including the closure of Sde Dov airport in Tel Aviv and the old Eilat Airport, moves that city officials claim will harm tourism. Now, the city may sustain yet another hit – the restoration of the 17% Value Added sales Tax (VAT) to purchases made in the city.

All products and services in Israel require payment of VAT, except for transactions done in Eilat. Technically, that should mean that products are 17% less expensive in the southern city than in the rest of the country, but in general companies deduct less than that, claiming higher transportation and administrative costs. But if Eran Yaakov, head of the Tax Authority, has his way, any savings from the VAT exemption will be lost altogether.

Speaking at an accountant’s conference – ironically, in Eilat – Yaakov said that the exemption was “unnecessary, as it does not contribute a great deal to the city’s economy. What needs to happen is to develop the city’s tourism and to establish it as a base for conventions. Unfortunately as a result of the exemption we are forced to deal with petty crimes, such as the reselling of cellphones and iRobot vacuum cleaners in other parts of the country” purchased in the city without VAT and resold elsewhere. It is estimated that the exemption is worth about NIS 600 million annually.

This is not the first controversial idea Yaakov has raised. He had previously proposed removing the VAT exemption on fresh fruits and vegetables (worth NIS 3.5 billion) and on income from apartment rentals.