Imposing a tax of up to NIS 100,000 on every aircraft taking off from Israel, based on weight categories and distance, is the proposal currently being formed by the Israel Tax Authority for the 2027 budget bill. Under the proposal, the tax will range from NIS 1,300 per flight for an aircraft weighing up to 50 tons on a domestic route, to as much as NIS 100,000 per flight for an aircraft weighing over 300 tons on a long-haul route.
The idea was developed from a proposal raised during discussions on the most recent state budget and in preparation for upcoming discussions on the next state budget. It was published by the Israel Tax Authority as part of a position paper on the taxation of flights leaving Israel. The document, prepared by the Tax Authority’s planning and economics division, examines alternatives for taxing flights and proposes a model based on taxing each aircraft leaving Israel by weight and the distance of the flight.
According to the position paper, the tax will result in an additional cost of NIS 12 per passenger for domestic flights, NIS 58 per passenger for medium-haul flights (mainly Europe), and NIS 274 per passenger for long-haul flights (to the U.S. and East Asia). An analysis of flight prices finds that the proposed tax will amount to 4-5% of the price paid by passengers. The Tax Authority estimates that state revenue from the tax will reach NIS 1.1 billion annually, based on 2025 fare levels.
The reason: air pollution
The Tax Authority explains that the rationale behind imposing this tax is that flights contribute significantly to global warming - a phenomenon in which Israel invests resources in both mitigation and addressing its consequences. Furthermore, the local air pollution caused by flights, along with the noise generated by aircraft during takeoff and landing, necessitates additional investment in healthcare and construction of noise-insulated structures.
However, unlike the situation in the automotive and industrial sectors, the current Israeli tax system does not account for the additional costs imposed on the economy by air travel. In fact, this sector is virtually untaxed (with the exception of direct taxes). This is because VAT applies only to consumption inside Israel. Consequently, the VAT rate on international flights is zero, and aviation fuel is exempt from the excise tax levied on fuels.
While a mechanism for reducing polluting emissions from aircraft has been in use globally over the last decade, requiring airlines whose emission levels exceed a certain threshold to purchase "offset units" from entities engaged in environmental improvement initiatives (such as forest conservation and development, the establishment of renewable energy systems, or the replacement of heating/cooking equipment), this mechanism is considered too lenient. As a result, several Western nations (including the UK, France, and Germany) have opted to tax outbound flights, ensuring that the cost of a flight reflects the industry's polluting impact.
A document released today examines various alternatives for imposing a tax on flights in Israel, such as a per-passenger tax, a tax based on flight distance, or a tax on aviation fuel. The option of taxing based on weight and distance categories was selected due to its operational simplicity and the certainty it provides airlines regarding the tax burden they will face, independent of the actual number of passengers.
Published by Globes, Israel business news - en.globes.co.il - on November 8, 2025.
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