Smokers’ and drinkers’ wallets get surprise pinch as taxes rise overnight

Having a cold one and a smoke became more expensive overnight after Finance Minister Yuval Steinitz signed an order, effective immediately, to raise the tax on cigarettes and beer at midnight Wednesday.

The tax raises are part of a package of measures officials say are needed to pay for several economic reforms, including free schooling from age 3.

The purchase tax on cigarettes went up overnight from 260.6% to 278.6%, raising the average cost of a pack of cigarettes, currently about NIS 20, by about NIS 2-3.

In addition the purchase tax on beer was raised from NIS 2.18 to NIS 4.19 per liter.

For beer, however, the additional tax was not applied on existing stocks, and bar owners are reportedly willing to swallow the tax rather than raise prices and scare away customers.

Together, the changes are expected to earn the treasury an annual NIS 1 billion.

Rumors had been circulating in Israel for the last week that a tax rise was on the way, driving importers and traders to begin stocking up on cigarettes in an attempt to beat the new taxes.

Although the changes have already come into effect, Steinitz will still need to get approval from the Knesset Finance Committee within the coming two months.

The government is planning on wide budget cuts that are will be brought for approval before the cabinet at a meeting next Monday.