JERUSALEM, Dec 23 (Reuters) – Israeli Finance Minister Bezalel Smotrich said on Tuesday he would introduce a law to tax commercial banks 15% on “excess” profits, accusing lenders of exploiting customers in the wake of a spike in interest rates over the past few years.
The levy would apply to bank profits that are more than 50% above the average of their earnings in the years 2018–22. It is meant as a temporary measure for five years.
To fight rising inflation, the Bank of Israel – like other central banks – rapidly raised short-term interest rates beginning in 2022 from 0.1% to a high of 4.75%. It reduced the benchmark rate in January 2024 by a quarter-point and by a similar amount to 4.25% last month as inflation has eased.
Smotrich said a significant portion of banks’ profits stems solely from the high interest rates in the market.
“Unfairly, these rates are passed on to the public quickly and in full in the form of loans and overdrafts, but only slowly and partially in deposits,” he said. “It is right that part of these profits be returned to the Israeli public.”
Israel’s five largest commercial banks reported combined net profit of nearly 9 billion shekels ($2.82 billion) in the third quarter of 2025.
Smotrich also signed a directive that would allow Israelis to import personal goods without paying value-added tax, currently 18%, up to $150 compared with $75 at present – a move criticised by local businesses who believe it will harm them.
With the cost of living in Israel high, many Israelis order from sites such as Amazon, Next and AliExpress.
Smotrich said Israel’s economy was controlled by a small number of powerful monopolies that “do not allow for fair competition”.
“There is no reason that a garment from an international brand should be sold here for dozens of percent more than abroad. There is no reason for you to pay more. Things can be cheaper here.”
($1 = 3.1913 shekels)
(Reporting by Steven Scheer; editing by Alexandra Hudson and Mark Heinrich)
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