Cabinet approves Smotrich VAT exemption — ahead of Knesset vote to overturn it

By Ariela Karmel

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22 February 2026, 5:43 pm

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Ariela Karmel is a political correspondent at The Times of Israel. She previously reported for Calcalist and Haaretz. She holds an MA in Middle Eastern and African History from Tel Aviv University and a BA in Political Science from the University of British Columbia.

The cabinet approves Finance Minister Bezalel Smotrich’s order to raise the tax-exemption ceiling on personal imports to $150, ahead of a Knesset vote to overturn the order tomorrow.

“The cabinet has taken another step today in proving that things can be cheaper here. The approval of the order I signed, which has already come into effect, gives it backing and strengthens this move,” Smotrich says in a statement, hailing the decision.

“The impact is already visible: more purchases, more competition, and lower prices. The goal is clear: to turn every citizen into an importer and to expand competition in the market. I thank Prime Minister Benjamin Netanyahu for the partnership,” he continues.

Smotrich’s executive order allows citizens to purchase up to $150 of personal goods from overseas without incurring an additional 18% VAT charge. The previous cut-off was $75.

The Knesset is expected to vote to cancel the order tomorrow, after the Knesset Finance Committee voted last month to move the discussion to the full Knesset, where lawmakers will vote on whether to revoke it. It’s highly unusual for the Knesset to overrule ministerial orders.

Since the order went into effect on December 24, it has been popular among the general public, but drawn sharp condemnation from local business owners, who succeeded in garnering support from other members of the coalition, in particular from Netanyahu’s ruling Likud party.

Likud MK and Knesset Finance Committee chair Hanoch Milwidsky, who has been a strong opponent of the measure, writes in a post on X that he calls on his “friends in the coalition not to support… the destruction of small businesses for the benefit of Chinese platforms.”

Milwidsky, along with other Likud MKs, including Economy Minister Nir Barkat and Eli Dalal, have claimed the measure effectively subsidizes foreign companies at the expense of local industry. Some opponents have accused Smotrich of populist policies ahead of this year’s election.