Israel's Mobile Carriers Cut Cellphone Prices After Finance Minister Repeals Tax

The order, which is expected to cost Israe; $122 million a year in lost tax revenue, also eliminates purchase tax on cellphone batteries and SIM cards

Israel's tax repeal has resulted in a price cut of about 15 percent.
Israel's tax repeal has resulted in a price cut of about 15 percent. Bloomberg

After Finance Minister Moshe Kahlon signed an order Wednesday repealing the 15% purchase tax on cellphones, Israel’s mobile carriers providers were quick to announce they were cutting the prices of their devices.

The order, which is expected to cost the state 450 million shekels ($122 million) a year in lost tax revenue, also eliminates purchase tax on cellphone batteries and SIM cards. The tax repeal is part of a larger plan unveiled by Kahlon on Tuesday to lower the cost of living for middle-class families.

Cellcom Israel was the first of the carriers to respond, announcing on Thursday that it was cutting by at least 15% the price of the smartphones that it sells directly and through its Dynamica subsidiary. The company’s announcement was followed by similar ones from Partner, Pelephone, Hot Mobile and Rami Levy Communications. Other sellers of mobile devices, including computer and appliance chains, are expected to follow suit.

Cellcom said it will now sell the LG G6 for 2,890 shekels, a reduction of 500 shekels. It will take 340 shekels off the price of the Samsung Galaxy A7, bringing it to 1,950 shekels.

Partner Communications said its price for the Apple iPhone 7 would drop from 3,749 shekels to 3,179 shekels. Pelephone announced that it was cutting its cellphone prices by between 260 and 800 shekels for buyers paying cash or purchasing a device on up to six payments. It will continue to offer special five-year warranties on the phones.

In a related development in the mobile service sector, Xfone 018, a company controlled by Hezi Bezalel that has been offering international long-distance and internet services, received a Communications Ministry license on Thursday to launch its own cellular network. It is expected to be up and running in about five months.

At a news conference with Bezalel, acting Communications Minister Tzachi Hanegbi noted that the new license will make Xfone Israel’s sixth mobile carrier with its own network. This in turn will promote continued stiff competition in the sector, Hanegbi said.

Throwing a bit of cold water on such enthusiasm, however, was Communications Ministry Director General Shlomo Filber, who spoke of the ministry’s responsibility to stabilize the market and ensure that the mobile carriers are capable of investing in their transmission networks. No other country has six competing cellular networks, Filber noted, and time will tell whether a degree of consolidation of the number of players will follow.

The wider plan announced by Kahlon on Tuesday includes an expansion of the negative income tax program, increased tax point credits for parents and subsidized after-school programs.

Bank of Israel Governor Karnit Flug expressed general support for the plan, which is in keeping with calls that she has made on a number of occasions in recent years regarding the need to increase government spending in the civilian sector. Another factor that may have motivated the central bank to support the plan, albeit not without qualifications, was the fact the Bank of Israel was informed about it in advance.