Israel’s Value Added (VAT) tax is set to increase from 17% to 18% starting Jan. 1, 2025. The tax applies to most products and services, excluding fruits and vegetables, and purchases in the resort city of Eilat, a duty-free zone.

It is part of the government’s effort to rein in a budget deficit that mushroomed to 8.1% of GDP due to the war.

The 1% increase will cost Israeli families an additional 1,000 to 2,000 shekels per year, according to estimates.