The Media Line: Knesset Revokes Smotrich’s VAT Exemption After Netanyahu Declares Free Vote   

Knesset Revokes Smotrich’s VAT Exemption After Netanyahu Declares Free Vote   

By The Media Line Staff  

The Knesset voted Tuesday to revoke a ministerial order sponsored by Finance Minister Bezalel Smotrich that would have raised the VAT exemption on online purchases from $75 to $150, dealing a rare parliamentary blow to a cabinet decision after opposition from business owners and dissent within the governing coalition.  

The order, which sought to exempt imported packages valued up to $150 from import tax, failed in a plenum vote, with 25 members of Knesset voting in favor and 59 against. The move came a day after Prime Minister Benjamin Netanyahu announced a free vote for coalition lawmakers on Smotrich’s proposal, allowing members to oppose the measure or abstain without violating coalition discipline.  

Netanyahu’s decision to permit a free vote was aimed at avoiding a formal coalition defeat that could have resulted had lawmakers been required to support the finance minister’s order. Several coalition members opposed the exemption or did not attend the vote, contributing to its defeat.  

Business owners had mounted protests against the proposal, warning it would damage Israeli retailers by increasing competition from foreign online sellers. While the exemption had been welcomed by many consumers, business groups argued it would erode local sales. Their campaign gained traction among coalition lawmakers, particularly within Netanyahu’s ruling Likud party.  

The exemption order had gone into effect on December 24. Despite public support, the backlash from local businesses intensified, culminating in Tuesday’s vote. It is highly unusual for the Knesset to overturn a ministerial order, making the outcome a notable setback for Smotrich and highlighting internal divisions in the coalition during an election year.  

Smotrich sharply criticized the vote, saying, “the economic left in Likud is trying to defeat the citizens of Israel in the service of monopolies and for a few votes in the primaries. While Prime Minister Netanyahu is busy with Israel’s security, a handful of Likud MKs are busy with petty politics and together with the opposition want to make us all pay dearly.”  

He added, “I will not let the public lose. Narrow personal interests will not defeat the good of Israel’s citizens. I do not intend to give up and surrender to the left. With God’s help, I will sign a new order and continue to care for Israel’s citizens. Against the entire left, it can be cheap here!”  

Opposition Leader Yair Lapid said the vote highlighted instability in the government, declaring that “Netanyahu has no coalition and his government is falling apart. He doesn’t even control his own party. He and Smotrich were humiliated again today in the plenum.”