Sources inform “Globes” that Ministry of Finance department of customs and VAT director-general Eitan Rub is considering a proposal to limit the customs duties exemption for duty-free shops from the current $200 to $100.
Local merchants are complaining that Israelis prefer to shop at duty-free stores, and are postponing their purchases of electrical appliances and other durable goods until their next overseas trip.
At the same time, the Israel Airports Authority, which is due to open the Ben Gurion Airport 2000 terminal soon, is concerned that reducing the duty-free exemption will create difficulties, and could even undermine the Airports Authority’s financial stability. Much of the Airports Authority’s revenue comes from royalties from duty-free franchise holders, based on a percentage of turnover. The franchise holders, such as James Richardson and Sakal Duty Free, are also concerned about the proposal.
Rub is due to decide the matter in the next few days. The Airports Authority’s annual revenue from duty-free store royalties is over $300 million. Tax specialists in Jerusalem and senior Airports Authority officials expressed concern that the measure could cost the Airports Authority hundreds of millions of shekels a year. This revenue is a key element in maintaining the profitability of the Ben Gurion 2000 project.
Duty-free stores were originally intended for tourists, in order to increase the state’s revenue in foreign currency. Most customers in the Ben Gurion Airport duty-free stores, however, particularly in the electrical appliances and sports stores, are Israelis.
Published by Globes [online] - www.globes.co.il - on August 8, 2004