After two years of debate, the Knesset passed legislation designed to reduce the use of cash in the economy in a move aimed at cracking down on Israel’s large black market.
The new law, passed on Monday, imposes a limit of 11,000 shekels ($3,197) on cash transactions involving businesses, which could be further reduced by the finance minister to 6,000 shekels in 2020. Cash transactions between private individuals, such as buying a used car, will be limited to 50,000 shekels, a level that may be lowered to 15,000 shekels.
Violators will receive warnings until the law goes into full effect in 2019, the Tax Authority said. The free-loan societies (gemachim) widely used in the Haredi community, however, will be exempt from the law, in keeping with the demand of ultra-Orthodox lawmakers.
The law also puts a ceiling on checks of 10,000 shekels. Tourists will be limited to paying no more than 55,000 shekels in cash to buy services or assets, although they can do so up to five times.
Israel’s government loses “billions of shekels in revenue every year” because of under-the-table cash transactions, the Tax Authority said on Tuesday after the vote.
The World Bank in 2010 said Israel’s so-called shadow economy was equal to 22% of economic output. Israel produced about $366 billion in 2017, which would mean the economy loses out some $80 billion.