Israel Proposes New Tax on Airline Tickets to Offset Environmental Impact

Israel's Tax Authority has proposed a new levy on airlines as part of the 2027 state budget preparations, aiming to mitigate the environmental damage caused by aviation. The proposed fee would be charged to airlines for each aircraft departing from Israel, with potential costs reaching up to 100,000 shekels per flight, according to Globes. The tax amount would be calculated based on the aircraft's weight and flight distance, ranging from 1,300 shekels for planes under 50 tons to the maximum for long-haul flights by aircraft over 300 tons.

If approved, these additional airline costs are expected to be passed on to consumers. The Tax Authority estimates that ticket prices could increase by an average of 12-58 shekels for European routes and approximately 274 shekels for flights to the U.S. and East Asia. The initiative is projected to generate about 1.1 billion shekels annually for the state treasury.

The rationale behind the tax is to address the environmental toll of air travel, including greenhouse gas emissions contributing to global warming, air pollution, and noise pollution. The Tax Authority argues that airlines in Israel do not adequately compensate for this damage, noting that international flight tickets are VAT-exempt and aviation fuel is excise-free. Similar environmental charges are already in place in countries like the UK, France, and Germany, where existing environmental certificate systems are deemed insufficient.

While other taxation models, such as passenger fees or fuel taxes, were considered, the chosen model based on aircraft weight and flight range was favored for its administrative simplicity. This approach allows airlines to pre-calculate expenses as the fee is independent of passenger load or number of travelers. This potential new tax comes at a time when Israelis are already facing increased financial burdens from rising VAT, electricity tariffs, property taxes (Arnona), and vehicle maintenance costs.