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Photo by: Ella Yerushalmi
Microbrewers in high spirits despite tax woes
By NIV ELIS
01/13/2013
The business end of beer is not all bubbles and foam, with one word summing up collective displeasure: taxes.
 
It’s easy to understand why people in the microbrewing business seemed happy at this year’s Israeli Beer Festival, which took place on Tuesday and Wednesday this week at Tel Aviv’s Nokia Stadium.

They’ll be the first to tell you that they love their jobs, they’re passionate about their product, and they are living their dreams, crafting a niche for Israel in the beer market.

But the business end of beer is not all bubbles and foam. Its mere mention proved quite the buzz-kill for the entrepreneurs peddling their brew at the show, with one word summing up their collective displeasure: taxes.

Prime Minister Binyamin Netanyahu and Finance Minister Yuval Steinitz’s July decision to up the sales tax on beer from NIS 2.18 to NIS 4.19 — a small part of a package of deficit-cutting measures — left small brewski businesses with a hangover.

“Everything here is expensive. When they increase the sales tax by 100 percent overnight, it almost breaks your business,” says Puah Alon, the marketing manager for Norman Premium, which imports premium beers and owns the Negev brewery in Kiryat Gat. “Both as importers and producers, this tax has hit us very hard, and not just us, but the entire industry.”

Microbreweries are a small but growing part of the Israeli beer scene. The vast majority of beer consumed in Israel comes from two companies: Tempo, which sells Goldstar and Maccabbee, represents 55% of the market share, and International Beer Breweries, which sells Carlsberg and Tuborg, represents another 40%.

While microbrews represented only 1% of the beer market just a few years back, according to Itzik Shapiro, co-founder of the Shapiro brewery in Beit Shemesh, that number has now jumped to 3%.

“Things were actually exploding. Another microbrewery was opening every month,” says David Cohen, whose Dancing Camels microbrewery in Tel Aviv is the oldest in the country.

The new tax however, “seems to have ripped the industry apart. There’s no new openings now and microbreweries are struggling to survive.”

Cohen estimates that the taxes he pays in Israel are several times larger than his fellow brewers in the United States. “If I opened up a microbrewery in midtown Manhattan and I paid federal excise taxes, New York state excise taxes and New York City has its own excise tax on alcohol production, and I took the total of that, it would come to one-eighth the production taxes here in Israel,” he says.

If the government needs to raise money, says Cohen, he understands. But the fact that it did not carve out an exception for small and medium businesses when they upped the beer tax has put a dent in an a growing industry.

Interior Minister Eli Yishai went so far as to denounce the tax’s effect on microbreweries, noting that their contribution to government revenues was a mere NIS 3.5 million.

“In my humble opinion, the State of Israel should be promoting promising ‘blue and white’ industries,” he said.
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