Knesset revokes Smotrich’s tax exemption for online purchases from abroad of up to $150

A measure that would have made it cheaper for Israelis to order goods online from abroad was revoked in the Knesset by a vote of 59 to 25 early Tuesday morning.

The order from Finance Minister Bezalel Smotrich let Israelis buy up to $150 of personal goods from overseas — including from popular sites like Amazon and Temu — without incurring an additional 18% value-added tax. That amount was double the previous limit of $75.

Since the order went into effect on December 24, it has been hailed by the general public but drawn sharp condemnation from local business owners who argued it would hobble their sales. They succeeded in garnering support from other members of the coalition, in particular from within Prime Minister Benjamin Netanyahu’s ruling Likud party.

“This activity is a death sentence for the business sector,” said Likud MK Eli Dalal, who opposed the measure, according to a Knesset readout. He said Israel’s high cost of living derives from housing, rent and food prices, which he says “unfortunately weren’t addressed over the last three years.”

After the vote, Smotrich lashed out at the members of Prime Minister Benjamin Netanyahu’s right-wing coalition who tanked his measure, branding them as part of the “left” and accusing them of linking up with the opposition and working against the government. He vowed to issue another order in place of the one that was revoked.

“What happened tonight in the Knesset plenum was the joining of two forces: the communist faction, the economic left in Likud,” and coalition MKs who “just want to hurt Prime Minister Netanyahu,” he said.

“Israeli citizens will pay more,” he added. “I’m not planning to give up. God willing, in the coming days, I will sign a new order, because I am determined, against the entire left, to prove that it can be inexpensive here.”

It is highly unusual for the Knesset to overrule ministerial orders. The vote was a notable defeat for Smotrich and reflected divisions in the coalition during an election year.

Dallal, along with Knesset Finance Committee chair Hanoch Milwidsky and Economy Minister Nir Barkat, both also from Likud, were among those who strongly opposed the order, accusing it of subsidizing foreign companies at the expense of local industry.

Netanyahu had reportedly sought to invoke coalition discipline to ensure the measure was upheld, but later backtracked and allowed lawmakers to vote as they chose.

Following the vote, Opposition Leader Yair Lapid mocked the coalition for failing to maintain an order issued by one of its leading members.

“Netanyahu does not have a coalition and his government is crumbling,” Lapid wrote on social media. “He doesn’t even control his own party. He and Smotrich were once again degraded in the plenum. We will continue to fight in the Knesset against the worst government in the country’s history.”

The vote followed a heated, marathon session during which lawmakers addressed the plenum to express support or opposition for the order. Negev and Galilee Minister Yitzhak Wasserlauf held an extensive filibuster as negotiations continued behind the scenes.

Protesters in the gallery representing small businesses opposing the order were escorted out by security during a speech by Smotrich.

The uproar surrounding the VAT order came alongside another controversial effort by Smotrich to lower the cost of living by eliminating tariffs on dairy products in order to import more of them.

The dairy industry has reacted with fury to that effort, holding protests and staging a brief strike that led supermarkets to be devoid of milk for part of a day.