Israelis soon will be able to bring as much as $500 of personal goods into the country from overseas without paying import duties, up from the current $325, under regulations signed by Finance Minister Yair Lapid on Tuesday.
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The change is effective as soon as it is published in official documentation this week.
The Finance Ministry heralded the move as “part of the fight against the high cost of living,” and said it would make online purchases from overseas less expensive for Israelis. But the large majority of Israelis are unlikely to actually benefit.
The move comes as a committee is expected to issue a report on easing imports.
Israelis who order items from abroad for personal use pay value-added tax, purchase tax and import duties, depending on the value and nature of the goods. Many items, including toys, cellphones, laptops and televisions, as well as many auto parts, are exempt from import duties.
The increased exemption on import duties applies to items imported by mail or air.
Imported items that cost $75 or more, including shipping costs, will still be subject to VAT, currently 18%.
The latest ease in taxation will apply to goods such as clothing and textiles, which are subject to import duties of 6%, shoes, normally taxed at 12%, and cosmetics and toiletries, subject to 12% duty.
But since the current exemption works out to a duty-free ceiling of 1,200 shekels, most private consumers do not pay import duties on these items.
Buy2USA, a company that enables consumers to import goods by ordering to an address in the U.S., says that only 8% of clothing and cosmetic purchases are for more than 1,200 shekels. Factoring in consumers who may be limiting purchases due to the current import duty cap - those buying 1,000 to 1,200 shekels of goods in a single order - the total comes to 10% of consumers in total.
An average purchase via Buy2USA in these categories is $167 – a bit more than half the current $325 exemption cap. And the service draws buyers who spend more than average on goods from abroad - according to credit-card data, the average overseas order this year was $53, or 204 shekels.
For most Israelis, a bigger barrier than import duties is VAT and purchase tax. Personal imports totaling $75 or less, including the cost of shipping, are exempt from these taxes.
“When buying things such as clothes and cosmetics, Israelis have figured out how to split up purchases so that no single package requires a tax payment, but then you have items like cellphones, which cost hundreds of dollars,” a person in the online-shopping sector said.
“The taxes on imported cellphones are VAT and purchase tax, and they’re so high [35.7%] that generally ordering from abroad isn’t worthwhile,” .
Instead, many people smuggle these items into the country.
“Israelis buy a cellphone when traveling abroad or ask a traveling friend to bring one, and thus don’t pay taxes,” this person said.
“Only once the state addresses the issue of purchase taxes or increases the VAT exemption will there be a real revolution here - for consumers and for the state, which will benefit from increased VAT payments on properly declared smartphones.”
The latest exemption will cost the state some 4 million shekels ($1.05 million) in annual revenue.