- Israel will increase its Value Added Tax from 17% to 18% starting January 1, 2025
- The VAT increase is a measure to address a budget deficit that grew to 8.1% of GDP following a war
- This tax hike will cost Israeli families an estimated additional 1,000 to 2,000 shekels annually
- The VAT applies to most goods and services except for fruits, vegetables, and purchases in Eilat
- The increase is expected to significantly impact housing prices, particularly for new apartment purchases
- Consumers might rush to buy expensive items in December before the new VAT rate is applied
- A pattern of initial spending surge followed by a drop and then normalization is anticipated after the VAT increase
- The VAT is a consumption tax paid at various stages of the supply chain, unlike a sales tax which is collected only at the point of sale
- Past VAT increases have led to price rounding up issues, where small increases result in disproportionately higher retail prices
- Israeli consumers with outstanding payments on major appliances will face the new VAT rate on their remaining payments
Source: jns.org
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
