Online shoppers in Israel get a big tax cut

Israel’s finance minister announces that the threshold for value added tax on items ordered from online retailers like Amazon will be raised significantly, in a bid to combat the high cost of living.

By World Israel News Staff

Online shoppers in Israel are poised to get a major tax cut, a senior Israeli official announced, in a move that will likely further strengthen the growing trend of purchasing from overseas internet retailers.

On Wednesday, Finance Minister Bezalel Smotrich (Religious Zionist Party) announced plans to sign a ministerial order doubling the threshold for the tax exemption on personal import items shipped from abroad via online retailers.

Currently, online shoppers can place orders valued up to $75 and be exempt not only from import taxes but also from Israel’s 18% value added tax (VAT).

Orders that cross the $75 threshold are charged the full 18% rate.

Under the new system, shoppers will be able to buy up to $150 worth of goods at a time and still enjoy the full VAT exemption.

The ministerial order is expected to go into effect in three weeks, following a 21-day review period during which objections can be filed against it.

The Finance Ministry says the move will help combat the high cost of living in Israel, both by enabling shoppers to avoid the 18% VAT on more items imported from online retailers, and by encouraging greater competition, pressuring Israeli stores to lower their prices.

“The Israeli consumer pays more than his counterpart in Western countries,” Smotrich said Wednesday.

“The main reason for this is that entire sectors are held by monopolies and tycoons who exploit the closed market to charge the Israeli consumer unjustifiably high prices. I have decided to increase competition in this area and thereby reduce the cost of living for households in Israel.”

According to data collected by the Finance Ministry, clothing and footwear prices in Israel are about 28% higher than the OECD average.

It is estimated that roughly 40% of the market is controlled by four large companies — a situation that leads to high prices and reduces the public’s purchasing power.