Finance Minister Bezalel Smotrich has raised the tax exemption threshold for online purchases from abroad to $130, openly defying a Knesset decision that capped the exemption at a lower level—an act that raises questions about coalition discipline and ministerial accountability in Israel's fragile government.
The move, reported by the Times of Israel, represents more than a dispute over tax policy. It exposes growing tensions within Prime Minister Benjamin Netanyahu's coalition over the balance between parliamentary authority and ministerial discretion—a friction point that could have implications beyond e-commerce regulations.
In Israel, as across contested regions, security concerns and aspirations for normalcy exist in constant tension. Yet the current crisis is one of governance: what happens when ministers openly disregard parliamentary decisions?
The Knesset had explicitly rejected raising the exemption threshold, concerned that higher limits would harm Israeli retailers already struggling with competition from international e-commerce platforms. The vote reflected cross-party consensus that protecting local businesses required maintaining lower thresholds for tax-free imports.
Smotrich's decision to proceed anyway—using ministerial authority to issue the order—has triggered criticism from coalition partners and opposition lawmakers who argue it sets a dangerous precedent for executive overreach. Several Knesset members have called for hearings on whether the minister exceeded his authority.
The policy itself has economic implications. Israeli retailers have long complained that international platforms like China's AliExpress and Shein operate with unfair advantages, offering products at prices that include minimal or no taxation. Raising the exemption threshold to $130 allows consumers to import more expensive items without triggering customs duties, further tilting competition against local businesses.
For Smotrich, who leads the far-right Religious Zionism party, the decision reflects his commitment to reducing consumer costs for Israeli households facing high living expenses. His supporters argue that protecting consumers from high prices should take precedence over shielding inefficient local retailers from competition.
But the political implications extend beyond economic policy. Smotrich is a crucial coalition partner whose party holds significant influence over government stability. His willingness to defy Knesset decisions raises questions about whether coalition discipline has broken down to the point where individual ministers can pursue independent agendas without consequence.
Some coalition members privately acknowledge that the government's narrow parliamentary majority and ideological diversity make enforcing party discipline increasingly difficult. Netanyahu has repeatedly navigated coalition crises by accommodating competing demands from coalition partners, but the accumulation of such incidents strains the government's coherence.
Opposition leader Yair Lapid's party seized on the incident as evidence of governmental dysfunction, arguing that a coalition unable to enforce its own decisions lacks the authority to govern effectively. The criticism resonates with voters already frustrated by political instability and frequent elections.
The incident also highlights tensions over economic policy within the coalition. While Smotrich has pursued free-market-oriented reforms in some areas, other coalition members prioritize protecting traditional sectors and domestic industries. These competing visions have produced inconsistent policies that satisfy neither camp.
For Israeli retailers, the decision represents another challenge in an already difficult environment. High commercial rents, expensive logistics, and competition from international platforms have pushed many small businesses toward insolvency. The expanded tax exemption removes another layer of protection for domestic commerce.
Whether the Knesset will successfully challenge Smotrich's decision remains unclear. Some legal experts suggest the parliament could pass legislation explicitly constraining ministerial discretion on tax exemptions, forcing the minister to comply. Others argue that such legislation would face coalition opposition and likely fail.
The broader question is whether this incident signals a new normal in Israeli governance—one where ministers pursue independent policies despite parliamentary opposition, confident that coalition survival takes precedence over institutional norms. If so, the tax exemption controversy is less about e-commerce than about the erosion of checks and balances in a system already strained by years of political instability.
