VAT-free shopping

Finance Minister Betzalel Smotritch yesterday signed into effect the order to expand the VAT exemption on personal imports to $150. It was $75 until now. The order is meant to go into effect today. I read somewhere that it can take 24-48 hours for online retailers to be fully updated, so be patient on your shopping sprees.

There is opposition from small business organizations who feel this is unfair competition to them as they have expenses and have to charge VAT while consumers are now being encouraged to buy more online VAT-free. Smotritch, justifying the expansion of VAT-free imports, said this is....

part of “a broad and significant series of steps” aimed at lowering the cost of living, alongside efforts to shake up the banking and dairy sectors.


All of these steps are predicated on the proposition that “it can be cheap here,” he said, arguing that “the Israeli economy is often dominated by a small number of strong monopolies,” giving consumers only the illusion of choice.

“There is no reason why an international chain’s garment should be sold here for” significantly more than abroad, he argued. “There is no justification for a shoe that is sold in the United States for half the price – to be sold here for double the price.”

First of all, yay! Amazon and AliExpress, take all my money!

Second, Smotritch is right. At least partially. Local retail does largely overcharge. But. But. But. But local retailers need to pay and to charge 18% VAT (increased last year from 17%, and is now being considered for another increase again to 19%). Local retail businesses need to pay a lot of taxes and regulatory fees, including arnona which is being increased again.

So yes, commerce in Israel is expensive, and the retailers take advantage when they feel they can and charge high prices, but some of those high prices come from the high taxes they have to pay and charge here in Israel. Smotritch can't really complain about them being expensive when he is comparing businesses with VAT and other taxes to businesses without VAT and those other high taxes..

While online retail is very popular, a lot of people also like to go into stores and buy thigns. Either they want to try the clothes on, or they want to buy something right now and walk out with it and not wait 2 weeks to get it and then see if it fits right or whatever. Many things don't ship to Israel. Many things are too expensive to ship to Israel. People will still go into stores. FM Smotritch should be helping and encouraging them to lower their prices as well by cutting their taxes - let local retail stores also sell up to a certain limit without VAT, or with lower VAT. 

Whenever I have been to Eilat, including a relatively recent trip, it s busy everywhere and at all the activities. The busiest places, by my observation, are the malls and shops. People vacationing in Eilat take advantage of the VAT free shopping. People will continue to buy plenty in store around Israel, especially if VAT is lowered or done away with locally as well.

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