Israel Considers New Tax on Flights to Offset Environmental Damage

The Israel Tax Authority is proposing a new departure tax on flights from Israel, which could increase airfare prices by 4-5%. The proposed levy's amount would be calculated based on the aircraft's weight and the flight's distance, aiming to compensate for the environmental damage caused by aviation. This initiative, reported by Channel 12, is expected to generate approximately 1.1 billion shekels annually for the state budget.

According to the Tax Authority's estimates, flights to Europe could see a price increase of about 58 shekels, while tickets to the United States and East Asia might rise by an average of 274 shekels. Experts support the reform, citing the significant environmental impact of air travel, including greenhouse gas emissions contributing to global warming, air pollution near airports, and noise pollution requiring public health and soundproofing expenditures.

Historically, Israel's aviation sector has benefited from tax exemptions not extended to other transport and industries, with international flights exempt from VAT and aviation fuel free of excise duties. In contrast to previous ineffective compensation quota systems, countries like the UK, France, and Germany have implemented direct taxes on flights to account for their environmental costs. The Israeli Tax Authority's chosen model, based on aircraft weight and flight distance, is intended to simplify calculations and provide airlines with predictable expenses, moving away from a fixed passenger or fuel tax.

This potential price hike comes as the global aviation industry faces ongoing challenges, including rising fuel costs, geopolitical tensions, and supply chain issues, which are already increasing carrier expenses. Australian airline Qantas and its subsidiary Jetstar have announced plans to reduce flights and raise ticket prices in response to these pressures.