Israel's Tax Authority Wants to Remove 200 Shekel Bill, Central Bank Governor Refuses
Translated & summarized from Bizportal by baba
Israel's Tax Authority Director Shai Aharonovitz proposed removing the 200 shekel banknote to combat the black market and boost tax revenue. However, Bank of Israel Governor Amir Yaron rejected the idea, asserting his sole authority and stating no intention to withdraw any banknotes. The debate highlights the significant amount of cash, particularly 200 shekel bills, in circulation and the government's need for additional funds amid budget pressures.
The story in 6 lines · by baba
- Tax Authority Director Shai Aharonovitz wants to remove the 200 shekel bill to fight tax evasion.
- Bank of Israel Governor Amir Yaron rejected the proposal, citing his exclusive authority.
- Approximately NIS 130 billion in cash is in circulation, with 75% in 200 shekel bills.
- The Tax Authority estimates removing cash could add NIS 20-30 billion annually to state revenue.
- The Bank of Israel emphasized cash's importance for economic stability and for certain populations.
- This is a renewed debate from a similar proposal in 2024.
The Director of the Tax Authority, Shai Aharonovitz, has proposed removing Israel's largest banknote, the 200 shekel bill, from circulation as a measure to combat the black market and increase state tax revenues by tens of billions of shekels annually. Aharonovitz estimates that transitioning to a cashless economy could add NIS 20-30 billion to state coffers each year by making it harder to hide income. However, the Governor of the Bank of Israel, Amir Yaron, has firmly rejected the proposal, stating that the authority to withdraw banknotes rests solely with him and that he has no intention of altering the current currency in circulation.
The dispute arises at a time when Israelis are holding exceptionally large amounts of cash, and the government is seeking additional revenue sources to fund defense spending and the deficit. The Bank of Israel issued a clear statement asserting its exclusive authority over banknote withdrawal and noted that no professional basis has been presented to justify removing any specific banknote. The bank also pointed out that no country has completely eliminated cash, and therefore, it does not intend to exercise its authority to cancel any banknote or change the mix of bills in circulation.
This is not the first time this issue has been raised, with a similar proposal discussed in 2024 as part of efforts against illicit finance. The current debate is fueled by the fact that approximately NIS 130 billion in cash is currently in circulation among the public, with about three-quarters of this amount in 200 shekel bills. The Tax Authority views this bill as a significant tool for tax evaders and criminal organizations, although it is also used for legitimate transactions.
The Bank of Israel also highlighted the importance of cash for economic stability, especially during power outages, communication disruptions, or cyberattacks on payment systems. It is also essential for populations less reliant on digital means, with about 70% of the public wishing to retain the option of paying with cash. Despite existing limitations on cash transactions, the Tax Authority is exploring further measures to increase tax collection, including potential changes to "trapped profits" reforms and the reintroduction of property tax on vacant land, as alternatives to broad VAT and income tax hikes.
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