Israel Tax Authority Chief Calls to Abolish 200 Shekel Note, Bank of Israel Rejects

The Director of the Tax Authority, Shai Aharonovich, called on Monday for the abolition of the 200 shekel banknote, and subsequently, the elimination of cash use in Israel. Aharonovich stated that a transition to a documented payment economy could add approximately 20 to 30 billion shekels annually to state coffers through tax collection. He explained that the fight against the black market is part of the search for revenue sources for the 2027 and 2028 budgets, given high defense expenditures. Aharonovich asserted that eliminating cash could yield 20-30 billion shekels in collections, but noted that the Bank of Israel opposes this.

The Bank of Israel responded swiftly, clarifying that the authority to abolish banknotes rests with the Governor of the Bank of Israel. They stated that no professional basis has been presented to justify the cancellation of any specific banknote. The bank also pointed out that no country has completely abolished cash, and therefore, the Governor has no intention of exercising his authority to cancel any banknote or alter the mix of notes in circulation.

This dispute between the two bodies is not new; a similar proposal to abolish the 200 shekel note was raised in 2024 to combat the black market and crime financing, with the Bank of Israel opposing it then as well, partly due to concerns that cash holders would shift to other denominations, foreign currency, or digital means.

Currently, about 130 billion shekels in cash are in circulation among the public, nearly double the amount from a decade ago. Including notes in banks and ATMs, the total currency in circulation reaches approximately 139 billion shekels. Roughly three-quarters of this value is concentrated in 200 shekel notes, the most convenient denomination for holding large sums. A recent Bank of Israel review highlighted that cash enables transactions during power outages, communication disruptions, and cyberattacks on payment systems, and is essential for populations less reliant on digital means. According to the bank's data, about 70% of the public wishes to retain the option of cash payments, and in 2023, approximately 43% of daily transactions were still conducted with cash.

Existing limitations on cash use include a 6,000 shekel ceiling for transactions with businesses and 15,000 shekels between private individuals, with legal exceptions. Abolishing the 200 shekel note requires a decision from the Governor, while a complete elimination of cash would necessitate broader legislative changes. For now, the 200 shekel note remains in circulation.