Finance Minister Avigdor Lieberman intends to abolish the VAT exemption on online purchases of products in the amount of up to $ 75. This week, a meeting of the management of the professional staff in the Ministry of Finance is scheduled to make a final decision on the matter.
According to the Treasury’s calculations, the cost of the VAT exemption amounts to NIS 1.5 billion per year. The Association of Chambers of Commerce believes that the cost is higher and amounts to NIS 2 billion per year. EU countries also decided to abolish a similar exemption on July 1.
The abolition of the exemption does not involve legislation but only the approval of regulations by the Minister of Finance, who may bring the matter to the attention of the members of the Finance Committee. The OECD countries also support the abolition of a similar exemption, and the professional recommendations to take such a step are not new. Despite this, to this day the last finance ministers, including Israel Katz and Moshe Kahlon, refused to cancel it on the grounds that it helps fight the cost of living.
The increased exemption for online shopping (from $ 50 to $ 75) was first introduced by Yuval Steinitz in 2012 following the social protest. The widespread use of this exemption has been made in the last five years following a significant expansion of online shopping.
The main victims of the move were local merchants, who charged customers full VAT on shopping in Israel, so not surprisingly the Association of Chambers of Commerce led a stubborn struggle on this issue.
According to Lin, the exemption unequivocally hurts hundreds of thousands of retailers, who are forced to compete with businesses and manufacturers in China and elsewhere. Cancellation of the benefit may contribute to employment and a significant increase in local trading activity, as well as to tax payments.
If the exemption is abolished, the only place where it will be possible to buy products without VAT is the duty-free complex, where the prices of the products are absolutely low compared to the local market. Such a move is expected to help encourage duty-free shopping.
Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.
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