(photo credit: INGIMAGE)
Israel was slated to reduce taxes on alcohol as of midnight on Tuesday after Finance Minister Moshe Kahlon signed a decree set to reduce the rates.
Following last week's cuts on Value Added Tax and corporate tax, the order on alcohol was set to decrease taxes imposed on beer by 46 percent and those levied on hard liquor by 21%.
According to the Israel Tax Authority, the ruling will reverse prior tax reforms
implemented on beer in 2012 and on hard liquor in 2013.
Initial alcohol reforms passed in early 2010 were staggered over the course of several years to allow manufacturers time to plan their purchases.
"After the VAT and corporate tax deductions, we will be able to send Israeli citizens another message for the holiday," Kahlon said of the move. "We will continue to lower the cost of living in Israel and relieve the consumer whenever possible."
He added that the decision on alcohol tax was made as the previous tax cut did not yield anticipated changes.
After the order takes effect, tax rates for beer with an alcohol content of 3.8% or more will be set at NIS 2.33 per liter instead of the NIS 4.33 rate enacted in 2012. Sales tax were due to remain exempt on beer that contains less than 3.8% alcohol and is sold in a recyclable bottle.
The rates set to take effect revert back to tax rates similar to those before a 2012 hike, which aimed to increase government revenue and deter alcohol consumption.
Despite doubling tax rate on beer in 2012, the increase hardly affected consumption levels, said the Tax Authority in light of an examination of sales in 2013-2015.
"Essentially, this means the imposition of taxes in 2012 fell almost entirely on consumers without any real benefit regarding a reduction of harmful drinking," the authority said in a statement.
Meanwhile, the order signed by the finance minister ruled that sales tax on alcoholic beverages would decrease from NIS 106.9 per liter to NIS 85 per liter.
While the cuts were expected to cause a loss of some NIS 250 million in state tax revenue, the Tax Authority said the move would likely balance out fiscally due to increased enforcement planned to target counterfeiting and smuggling of alcohol.
The National Authority against controlled substances has come out against the decision, made by Finance Minister Moshe Kahlon, to lower taxes levied on alcohol.
Attorney Eitan Gorni, the de facto chairman of the authority, attacked the change in policy, labeling it as dangerous.
"The decision of the Finance Minister regarding the lowering of taxes is something we will be regretting for years," Gorni said.
"We are talking about a decision that contradicts global trends which show that higher taxes on alcoholic beverages are an integral part in the fight against alcoholism, as well as the social and economic damages that it brings."Niv Elis contributed to this report.