Tax on beer, booze to be slashed
Reduction of taxes on beer and alcoholic beverages follows previous doubling of tax , which didn't reduce drinking; it will also serve to fight the bootleg alcohol industry.
In 2012 the tax on beer was doubled, and it was determined that the tax would be NIS 4.33 per liter of beer with a concentration of over 3.8 percent – a significantly higher tax level than is customary in the OECD.
Starting Tuesday night, the tax rate for this beer will be 2.33 shekels per liter. Beer in reusable bottles with an alcohol concentration of 3.8 percent will remain exempt from purchase tax.
The Finance Ministry said that examination of the results of the previous tax increase on beer showed that despite the doubling of the tax, it barely affected the consumption levels of beer.
This means that the imposition of the tax in 2012 fell almost entirely on consumers without any real benefit with regard to reducing harmful drinking.
"We will continue to lower the cost of living in Israel and relieve the consumer wherever possible," Kahlon said Tuesday. "We intend to continue the trend and will not hesitate to correct distortions in the tax system as required and to make it easier for citizens. The move eliminates a tax increase set two years ago, as it became clear that it had not yielded the anticipated results and had even negative consequences, and it was carried out after a thorough examination by the Tax Authority, which supports the move."
The decree was approved with the recommendation of a professional team headed by the director general of the Finance Ministry, Shai Babad, together with Tax Authority representatives, according to whom the changes made in 2012 on the beer tax and the taxation of alcohol in 2013 should be annulled. It thus once again adopted the tax rates existing prior to 2012, which were about half the current rate according to the original outline as suggested by the Tax Authority.
The tax change will take effect at midnight Tuesday, after its publication in "Reshumot", Israel's gazette of record in which all new laws are logged.
In accordance with the team's recommendations, an immediate structural change was suggested due to negative developments in the alcohol industry – the blossoming of a bootleg industry that produces harmful beverages, damage to legitimate business that must struggle with the existence of a well-developed black market, and direct harm to consumers through increased taxation.
Accordingly, the sales tax on alcoholic beverages was reduced from NIS 106.9 per liter of alcohol to NIS 85.
Kahlon said that with his decision, Israel is returning to its original focus, as one has to first and foremost fight the pirate beverage industry that makes alcohol unfit for human consumption, while ensuring public health and simultaneously reducing taxes.
The tax reduction will supposedly result in a loss of NIS 100 million in tax revenues, but the Finance Ministry argues that the move is expected to be balanced fiscally, thanks to increased enforcement in the area of counterfeiting and alcohol smuggling.
