‘It can be cheap here’: Smotrich raises VAT exemption on overseas orders to $150

Finance Minister Bezalel Smotrich on Tuesday signed an order expanding the value-added tax exemption on personal imports from $75 to $150, arguing that it is necessary to allow cheaper imports to encourage competition and lower prices.

The move will go into effect on Wednesday. The VAT, a type of consumption tax, is set in Israel at 18 percent.

In a statement, Smotrich said it is part of “a broad and significant series of steps” aimed at lowering the cost of living, alongside efforts to shake up the banking and dairy sectors.

All of these steps are predicated on the proposition that “it can be cheap here,” he said, arguing that “the Israeli economy is often dominated by a small number of strong monopolies,” giving consumers only the illusion of choice.

“There is no reason why an international chain’s garment should be sold here for” significantly more than abroad, he argued. “There is no justification for a shoe that is sold in the United States for half the price – to be sold here for double the price.”

The finance minister asserted that the change will “oblige the monopolies to enter into real and fair competition for your hearts and your pockets. To be better and cheaper and more service-oriented and more competitive.”

The move — on which government bodies were split, according to the Globes business outlet — drew outrage from some Israeli businesspeople, who took the move as a betrayal of domestic industry.

The Federation of Israeli Chambers of Commerce business umbrella group and the Manufacturers Association of Israel opposed raising the tax exemption level and are likely to file court petitions, the Ynet news outlet reported when Smotrich announced the plan last month.

On Tuesday, as the change was being formalized, protesters blocked the entrance to the Finance Ministry building, denouncing the move. They lit a fire and held posters calling the change a “death sentence for small businesses,” and pleading with the prime minister to intervene.

Smotrich, for his part, said that he wants consumers “to buy in Israel, but I do not want you to be a captive customer. I don’t want the monopolies to take advantage of the fact that you are a captive customer to charge you exorbitant prices and get rich at your expense.”

Israel is ranked fourth in the list of developed countries with the highest comparable prices, according to an Organization for Economic Co-operation and Development report published earlier this year. Last year, the OECD reported that food and beverage prices in Israel were 52 percent higher than the average among developed countries, second only to South Korea.