Taxes raised on cigars, cigarettes and beer

The Finance Ministry estimates the new levies will net the state some NIS 1 billion.

July 26, 2012 01:54
1 minute read.

smoking (illustrative). (photo credit: Thinkstock/Imagebank)

Finance Minister Yuval Steinitz signed an order Wednesday evening increasing taxes on cigars, cigarettes and beer.

The order, which went into effect at midnight, lobbed a 10 percent tax on existing retail inventories of tobacco products and increased the sales tax on future purchases from 260.6% to 278.6%, adding an estimated NIS 2-3 to the price of each pack of cigarettes.

The price of beer also went up as the tax rose from NIS 2.18 to NIS 4.19 per liter.

The Finance Ministry estimates the new levies will net the state some NIS 1 billion.

So-called “sin taxes” are popular policy tools as they both increase government revenues and deter “bad” behaviors, such as drinking and smoking.

Steinitz also agreed with Prime Minister Binyamin Netanyahu that the cabinet will vote on Monday regarding tax changes for Israel’s largest companies, including both increases and breaks. Companies that amass profits instead of paying out dividends, which are taxed, will now be able to pay a reduced tax as an incentive to pay these dividends.

The state expects to net some NIS 100 billion from the deal.

Earlier Wednesday, before Steinitz signed the order, heads of the Israel Cancer Association voiced their support for the plan to raise taxes on tobacco and alcohol.

In separate letters to Steinitz and Netanyahu, who formally serves as health minister, ICA president Prof. Eliezer Robinson and director-general Miri Ziv said the organization had long supported such tax hikes because significantly reducing consumption saves lives. More than 10,000 people a year in Israel die from the effects of smoking or secondhand smoke, they said, and others are debilitated from serious diseases including heart attack, cancer and respiratory disease.

“There is no safe level of tobacco use,” they asserted, “and it is addictive.”

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