Israel Tax Authority Proposes Abolishing 200 Shekel Notes Amid Cash Surge

Israel's Tax Authority is reviving a proposal to abolish 200 shekel banknotes and potentially phase out cash entirely, citing a significant increase in the amount of physical currency in circulation. The initiative, spearheaded by Tax Authority Director General Shai Aharonovich, aims to combat the shadow economy and boost tax revenues.

Aharonovich raised the issue at a tax consultants' conference, referencing a recent Globes report highlighting the substantial amount of cash held by the public. According to Bank of Israel data, cash outside the banking system reached 129 billion shekels by mid-2026. This figure, along with a 3.5% increase in cash circulation in the first half of 2026 (projected at 7% annually, up from 2.6% in 2025), has raised concerns about the effectiveness of current measures against tax evasion.

The Tax Authority estimates that a complete shift to cashless transactions could generate an additional 20 to 30 billion shekels in tax revenue by improving oversight of financial flows. Aharonovich cited the case of Meital Saar, wife of the Mayor of Kfar Saba, where a large quantity of 200 shekel notes was reportedly found, as an example of significant cash hoarding, though he acknowledged this alone doesn't prove illegality.

However, the Bank of Israel remains opposed to the proposal, despite the Tax Authority's arguments. The debate over abolishing large denomination notes is not new. The Tax Authority plans to revisit the issue after the upcoming elections. Currently, 200 shekel notes remain legal tender, and Aharonovich's statement reflects the authority's position, not official government policy. The success of the initiative hinges on the Bank of Israel's stance and future government decisions regarding cash transaction limits.