VAT exemption on personal imports to rise from $75 to $150

Treasury says aim of Smotrich’s move is to reduce cost of living, remove power from alleged monopolies that keep consumer prices higher than most of Europe; public has 21 days to comment

By Sam Sokol 26 November 2025, 3:56 pm

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Sam Sokol is a former political correspondent at The Times of Israel. He was previously a reporter for the Jerusalem Post, Jewish Telegraphic Agency and Haaretz. He is the author of "Putin’s Hybrid War and the Jews"

In a move aimed at combating the rising cost of living, Finance Minister Bezalel Smotrich has decided to “dramatically” expand the value added tax exemption on personal imports from $75 to $150, the Finance Ministry announced Wednesday.

In a statement, the ministry said that Smotrich aims to “ease the cost of living” and “remove from monopolies and companies that control the economy the ability to charge Israeli consumers higher prices than in most European countries.”

VAT, a type of consumption tax, is set in Israel at 18 percent.

Market concentration has led to “a high and unjustified price level for all households,” while “the purchasing power of Israeli citizens is lower than that of most European countries, with Israel ranked 22nd out of 38 countries,” the treasury added.

Along with its statement, the Finance Ministry published a copy of Smotrich’s order for a 21-day public comment period before it is signed and implemented.

The Federation of Israeli Chambers of Commerce business umbrella group and the Manufacturers Association of Israel both oppose raising the tax exemption level and are likely to file court petitions should Smotrich go ahead with the plan, the Ynet news outlet reported.

Airport workers unload packages from a freight plane at the Ben Gurion International Airport on October 20, 2020. (Olivier Fitoussi/Flash90)

The State Comptroller is in favor of raising the ceiling for VAT exemption, the Globes business outlet reported Tuesday, while the Finance Ministry’s Budgets Division is against the move.

In a report last month, the comptroller said that personal imports act as a restraint on prices at home, encouraging competition, and bringing down the cost of living.

The Budgets Division, in response, warned that raising the tax exemption would harm fair competition in the local market that, in the long term, could lead to loss of jobs and damage to productivity and wages. It also noted that the European Union, the UK, and Australia have all canceled their VAT tax exemptions on personal imports.

Last year, the value of parcels worth less than $75 that passed through customs totaled less than $1 billion, the Globes reported.

Israel is ranked fourth in the list of developed countries with the highest comparable prices, according to an Organisation 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.

“The Israeli consumer pays more than their counterparts in Western countries,” said Smotrich. “The main reason for this lies in the fact that entire sectors are held by monopolies and tycoons who exploit the closed economy to charge the Israeli consumer a high and unjustified price. I have decided to increase competition in this sector and thereby reduce the cost of living for households in Israel.”