Minister of Finance Yair Lapid has submitted a budget proposal which contains a number of tax related provisions including a 1% increase in the VAT rate (to 18%) as well as the removal of exemptions for fruits and vegetables. On the basis of 2012 figures, the Ministry of Finance estimates that the rate increase will raise NIS 4 billion per year and the elimination of the exemption on produce will raise NIS 2.2 billion. The budget outline further suggests that Israel will impose VAT in the southern resort city of Eilat, which is currently a duty-free zone.
The cabinet has until 9 June 2013 to pass the budget, at which time the Knesset (the Legislature) will have a day to vote to move it to the Knesset Finance Committee. The budget would then go up for final passage by the end of July.