Cigarettes Taxes and Smoking Rates

In a surprise move last night, Minister of Finance Yuval Steinitz signed an amendment to the excise and purchase tax order, which immediately raises taxes on cigarettes and beer. A 10% tax is also being imposed on stocks of cigarettes already held by businesses. The new taxes will earn the government extra annual revenues of between NIS 700 million and NIS 1 billion. Under the terms of the order, tax rates on cigarettes will rise from 260.6% to 278.6%. The expected influence of the tax will be to add NIS 2.4-2.9 per pack of cigarettes. The tax rate on cigars and cigarillos was raised from 65% to 75% and the minimum level of tax on a pack of cigarettes was raised to NIS 12. Steinitz also signed an order raising the purchase tax on beer from NIS 2.18 per liter to NIS 4.19 per liter. The Knesset's Finance Committee will be required to ratify the rises within two months even though the price rises take immediate effect. These measures are the first in a series of cuts and tax hikes that are expected to be imposed by the government next week, and which will include a 1% hike in VAT to 17% and a NIS 700 million across-the-board cut at government ministries.