The Ministry of Finance published an order today doubling the value of personal imports exempt from VAT from $75 to $150. Smotrich can sign the order within 21 days, following which it will come into force immediately.
Smotrich decided on the move despite opposition from officials in his own ministry. As justification for it he stated that four large companies had 40% of the clothing and footwear market in Israel "and in fact set unjustifiably high prices for all households." Smotrich believes that bringing new players into the market, even if it is a matter of overseas websites, will boost competition and ease the cost of living, even though he himself admits that this is not the way to do so "according to the books of economic theory."
"Globes" has learned that there is opposition to the order in the Knesset. Knesset Finance Committee chairperson MK Hanoch Dov Milwidsky said, "When Israeli industry is fighting for its life and the State of Israel is investing billions in support and compensation for businesses for war damage, it would have been appropriate to strengthen local trade and Israeli production, instead of strengthening foreign manufacturers and enriching Chinese retail platforms that don’t pay taxes in Israel. This is a classic example of destructive election economics."
The Knesset Finance Committee is examining whether it can oblige the minister of finance to apply to it for approval for the move. At present, however, he can still proceed by simply signing the published order.
According to Ministry of Finance figures, prices of clothing and footwear in Israel are 28% higher than the OECD average, while the purchasing power of Israelis is lower than in most European countries. Israel is 22nd out of 38 countries, because of the high cost of living in the country.
Shachar Turjeman, president of the Federation of the Israeli Chambers of Commerce, responded angrily to Smotrich’s plan. Talking to "Globes" he said, "What other finance minister in the world does all he can to send growth and purchases out of the country? Where else do they subsidize buying from abroad? Every other country has abolished these exemptions, because they realized that they were damaging the country itself."
Turjeman is also chairperson of the Brill group and of the Association of Commerce and Fashion Chains, which will be harmed by the encouragement of competition through purchases overseas via the Internet. He argues that expanding the VAT exemption will not lead to real improvement in the cost of living in Israel. "The cost of living belongs to the food sector, not to clothing and footwear. Central Bureau of Statistics figures show that in the past decade there has been a 35% decline in prices of non-food products. But is anyone going to order yogurt, pasta or milk on the internet?" he asked.
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Smotrich plans to double VAT exemption for personal imports
for his part, Smotrich says that the decline in product prices in the past decade is thanks to the original $75 tax-exempt amount for personal imports set by then minister of finance Yuval Steinitz.
Published by Globes, Israel business news - en.globes.co.il - on November 26, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
