Two Arab men, both residents of the northern Arab town of Sakhnin, were stopped as they left the southern city of Eilat, after Israeli intelligence and the Eilat VAT and Customs Authority's Drug Department cooperated to stop them.
Initial investigation showed the pair embarked on a three-day shopping spree, during which they purchased 450 cans of Similac baby formula for a total of 35,000 NIS.
The cans were purchased at a number of different stores throughout Eilat.
Authorities suspect the two planned to smuggle the cans out of Eilat in order to avoid paying VAT (value added tax) as required when buying merchandise to sell outside the city.
Businesses and purhcases in Eilat, Israel's southernmost city, are exempt from VAT. Visitors are allowed to purchase articles for personal use or gifts when in the city, but not for retail purposes.
Investigations also showed one of the suspects was unemployed and receiving unemployment from the National Insurance Institute, and is not registered with the government as owning a business. During the questioning, this suspect claimed he had bought the Similac cans in order to distribute them to members of his family.
However, authorities believe the pair intended to sell the cans at the regular VAT-inclusive price in their home town of Sakhnin, and pocket the 17% VAT which should have gone to the government.
The investigation is still ongoing and authorities are investigating the stores in which the Similac was bought.
The car and formula were confiscated by customs authorities.
Eilat Customs and VAT manager Adit Harush said the Customs Authority will deal harshly with those who break the law in order to uphold and protect the law establishing Eilat as a free trade zone.