Ministry to reexamine alcohol prices after tax hike

In June, Finance Minister Lapid approved order to implement new tax, raising alcohol prices from NIS 84 to NIS 105 per liter.

June 12, 2013 18:40
2 minute read.
A GROUP of teenagers decide on their beverage of c

teenagers alcohol 311. (photo credit: Ariel Jerozolimski)

The Finance Ministry on Wednesday told The Jerusalem Post it will seek ways to reexamine alcohol prices following an outcry over its decision to raise alcohol taxes six months earlier and higher than planned.

Alcohol reforms passed in early 2010 were staggered over the course of several years to allow manufacturers breathing room to plan their purchases.

Alcohol taxes were scheduled to rise from the current regime of 75 percent of the price plus NIS 21.28 per liter of alcohol in the beverage to a flat system of NIS 84 per liter of alcohol in the beverage next January.

The thinking behind the change was to tax products with higher alcohol content at higher rates; for example, the price of a liter of beer with 5% alcohol would be less than a liter of whiskey with 40% alcohol. Another part of the reasoning was to limit the “social damage” caused by alcohol, a reference to youth drinking.

Earlier this month, Finance Minister Yair Lapid approved an order to implement the new tax starting in July, raising it from NIS 84 to NIS 105 per liter, saying the change would bring the government an additional NIS 200 million of revenue.

Chaim Oz, a vice president at the Federation of Israeli Chambers of Commerce, said businesses would take a big hit from the sudden change. The new pricing would seriously hurt sales, he said. With large orders already placed for the coming months, the sudden change could bury importers and suppliers, he said.

“Some cheap vodkas will go from NIS 40 to NIS 95,” a 140% increase in price, Oz told the Post. “Nobody will buy it at that price.”

While the effect on youth drinking was certainly welcome, he said, it did not justify the broader action.

“The tax will bring youth drinking down, and we’re very pleased with that,” Oz said.

“We’re not for irresponsible alcohol use, especially by youth. But this doesn’t just affect them. They’re not drinking Grey Goose, Glenfiddich, Van Gough – that’s what the middle class is drinking.”

Alcohol prices, which are further inflated at bars and night clubs, may also affect tourism. One reveler from the UK, in Tel Aviv for gay-pride festivities last week, said he was shocked by the prices of drinks in the city.

“They tried to charge me 85 shekels for a drink at one bar,” he said. “That’s more than twice what I would pay at a fanciest club in London.”

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