Israel Considers New Tax on Flights to Fund State Budget

Israel's Tax Authority has proposed a new levy on aircraft departing from Israel, which could increase airfare costs for passengers. The proposed tax, detailed in a position paper released Sunday, aims to generate approximately 1.1 billion shekels annually for the state treasury, based on 2025 prices. The tax would be levied on each departing aircraft, with the amount determined by the plane's weight and flight distance, ranging from about 1,300 shekels for smaller planes on domestic routes to up to 100,000 shekels for large aircraft on long-haul flights. This is expected to translate to an additional cost of roughly 58 shekels per passenger for medium-haul flights to Europe, about 274 shekels for long-haul flights to destinations like the United States and East Asia, and approximately 12 shekels for domestic flights. The Tax Authority justifies the proposal by citing the environmental damage caused by aviation, which accounts for about 4% of global warming, as well as air pollution and noise pollution. The proposal notes that the aviation sector in Israel is lightly taxed compared to other industries, with international flights subject to zero VAT and jet fuel exempt from excise tax. While other options like a per-passenger tax or a fuel tax were considered, the current proposal based on aircraft weight and flight distance was favored for its simpler collection and predictability for airlines. Several European countries, including the UK, France, and Germany, already impose taxes on departing flights. This recommendation is currently under professional review and will be considered during upcoming state budget discussions. It is not yet a confirmed tax, and no start date for collection has been set.