Daily Israel Report

Steinitz Raises Tax on Cigarettes and Alcohol

A day after announcing a VAT increase, Finance Minister Yuval Steinitz signs an order to raise the tax on cigarettes and alcohol.
By Elad Benari
First Publish: 7/26/2012, 3:14 AM

Yuval Steinitz
Yuval Steinitz
Flash 90

Finance Minister Yuval Steinitz signed on Wednesday evening an order to raise the tax on cigarettes and alcohol, especially beer. The order took effect at midnight.

As per the order, the cigarette tax will be raised from 260.6% to 278.6% and the tax on beer will rise from 2.18 shekels to 4.19 shekels.

In addition, a tax at a rate about 10% will be imposed on vendors’ existing inventories of cigarettes. The tax hikes are expected to generate one billion shekels for the State's coffers.

The tax hikes come one day after Prime Minister Binyamin Netanyahu announced that he plans to raise the VAT by 1% or even more and make an across-the-board cut for government ministries totaling 700 million shekels.

Netanyahu and Steinitz intend to bring the proposal to the cabinet on Monday. The planned economic measures were criticized by many, with Labor leader MK Shelly Yechimovich saying that the measures would “bring the middle class down to its knees.”

“The deep pit in the budget was created by Netanyahu himself when he wildly reduced the justified taxes for the rich, and now he imposes the VAT – a cruel, unjust and unwise tax which is imposed on even the poorest people,” she said.

The Kadima party also criticized the move, saying that “Netanyahu is dead checking the middle class.” Kadima chairman and opposition leader Shaul Mofaz added that “these decrees increase despair.”

Shas Chairman Eli Yishai said on Wednesday that his party would oppose the economic measures and warned that there is only a fine line dividing between many middle-class families and the weaker sections of society.

Yishai told Kol Yisrael radio that there is no escape from raising the tax on luxury goods and said that more taxes should be taken from Israel’s wealthier citizens rather than from the poorer ones. 

National Union chairman MK Yaakov "Ketzaleh" Katz also voiced his objection to the measures, saying, “The National Union will do everything in its power to prevent the budget cuts. What Netanyahu calls ‘adjustments’ translates to a lateral and direct damage to low-income and large families.”