Israel Proposes New Flight Tax That Could Raise Airfares by Up to NIS 274

The Israel Tax Authority published a position paper on Sunday recommending the introduction of a new tax on aircraft departing from Israel, based on their weight and flight distance. According to the authority’s Planning and Economics Division, the proposed measure could generate approximately NIS 1.1 billion in annual state revenue while increasing ticket prices by between NIS 12 and NIS 274 per passenger.

The tax would be imposed on airlines, although officials expect at least part of the additional cost to be passed on to passengers. The levy would range from approximately NIS 1,300 for a short flight operated by a small aircraft to nearly NIS 100,000 for a long-haul flight using a large aircraft. For example, a Boeing 737-800 flying to Athens would incur a tax of approximately NIS 9,400, while a Boeing Dreamliner flying to New York would be charged around NIS 64,500.

According to the authority’s calculations, flights of up to 500 kilometers, including routes to Jordan and Egypt, would become approximately NIS 12 more expensive per passenger. Flights of up to 4,000 kilometers, covering Turkey, most European countries, and destinations in the Gulf, would see an estimated increase of NIS 58 per passenger. For longer flights, including routes to the United States and East Asia, the additional cost could reach NIS 274 per passenger.

The Tax Authority estimates that 86% of passengers would pay no more than NIS 58 in additional costs. It also projects that approximately half of the overall tax burden would fall on foreign residents and households in Israel’s highest income decile. The calculations do not distinguish between economy, business, and first-class passengers.

Environmental Concerns Behind the Proposed Aviation Tax

The proposal, which was previously raised during budget discussions, has been published ahead of the next round of government budget deliberations. Tax Authority officials argue that the aviation industry is responsible for approximately 3.8% of Israel’s greenhouse gas emissions and contributes to air pollution and noise, creating additional public expenditure on healthcare and building insulation.

Officials also pointed to existing tax exemptions in the aviation sector, noting that international airline tickets are exempt from value-added tax (VAT), while aviation fuel is exempt from excise tax. The current system of purchasing environmental carbon offset credits is also considered insufficiently stringent.

Several European countries, including the United Kingdom, France, and Germany, already impose taxes on departing flights, while Sweden abolished its aviation tax last year.

The Tax Authority examined several alternative approaches before recommending the aircraft-based levy. A tax on aviation fuel was ruled out because of international agreements and concerns that airlines could avoid the charge by refueling abroad. Officials also rejected a direct tax based on individual passengers or exact flight distances.

Instead, the authority selected a system that calculates the tax according to aircraft characteristics and flight distance, allowing airlines to know the amount they would owe in advance. The proposal remains a recommendation and would require further government consideration before any new aviation tax could take effect.