As packages sent to Israel from abroad face delays and some Amazon sellers initiate a boycott, the potential end of the VAT (value-added tax) exemption on packages under $75 is stirring debate. The Finance Ministry’s plan to revoke this exemption, part of broader budget-tightening efforts for 2024, is met with both support and opposition.
In a bid to bolster the economy and address financial challenges, the Finance Ministry is eyeing the elimination of the VAT exemption, a move long advocated by its staff and supported by the head of the Israel Tax Authority, Shay Aharonovich. Local retailers, seizing the opportune moment amid ongoing economic strain, are backing the proposal, applying measured pressure for its approval.
The recent closure of the Azrieli Group’s “Azrieli.com” website underscores the underdeveloped state of e-commerce in Israel compared to international counterparts. Local regulations, including the VAT exemption exclusively granted to international websites, are identified as contributing factors to this lag.
Shahar Turgeman, Chairman of the Trade Chains Association and the Beryl Group, advocates for the exemption’s abolition, highlighting its financial impact. Turgeman, who has engaged with multiple finance ministers, suggests a compromise – a 17% discount voucher for domestic purchases, discouraging overseas shopping. He argues that addressing this distortion is essential, particularly amid economic challenges and the need for increased revenue.
Critics, represented by nonprofit Lobby 99, caution against abolishing the exemption, emphasizing its significance in the face of a rising cost of living. They contend that the exemption allows the purchase of essential goods at lower prices and fosters competitive tension that curbs exorbitant prices domestically. The State Comptroller’s recommendation to increase the VAT exemption amount and data from the Knesset’s research center supporting the positive impact on the cost of living further fuel the debate.
As Israel contemplates the potential shift in VAT policy, the repercussions on consumers, retailers, and the broader economy remain central to the ongoing discussion.
