Report: Kahlon to Eliminate Import Duties, Purchase Tax on Consumer Goods

Finance Minister Moshe Kahlon plans a sweeping cancelation of all import duties and purchase taxes on imported consumer products. Yisrael Hayom quoted Kahlon as saying that the removal of the taxes will even the playing field for Israeli retailers who have in recent years lost business to online retailers.

“The market is wide open today, whether we like it or not,” the newspaper quoted Kahlon as saying. “Anyone can order anything from anywhere at any time, and no one can stop this. But it gives us an opportunity to lower the cost of living,” he said.

Imported products sold in Israel generally have three tax components — import duty, purchase tax and Value Added (sales) Tax (VAT). Import duty ranges from 0 percent on products made in countries with which Israel has trade agreements, to as much as 50 percent on large appliances from other countries. Most products imported into Israel are manufactured in China, a country with which Israel does not have a free trade agreement. For example, many toys, furniture items, shoes and glasses frames and lenses imported from China carry a duty of 12 percent, while larger electronics can carry a duty of up to 30 percent. Kahlon’s plan would cancel duties on all consumer items across the board.

Kahlon also plans to cancel the purchase tax imposed on nearly all imported products. This tax ranges from 10 percent to over 100 percent of the value of a product. “Purchase tax was imposed originally to encourage Israelis to purchase locally produced goods, but most consumer goods are not produced here,” the report quoted senior Finance Ministry officials as saying. “Thus, there is no reason for the purchase tax today.” The report said that Kahlon has worked out arrangements with the heads of Israeli companies that do compete with imports, to provide them with assistance to compete fairly with imports.

According to Ministry projections, the elimination of duties and purchase tax will reduce the price of consumer goods on average by 10 percent to 15 percent. More important, the Ministry said, is the fact that Israelis will have the opportunity to buy locally at the same prices they would pay online. The increased local sales will provide more VAT payments for the government, making up the losses from the other taxes. Online purchases are subject to VAT charges as well, albeit less.