Tax hike on booze moved forward to July

Finance Minister Yair Lapid announced on Tuesday that a tax hike on alcoholic beverages would go into effect on July 1 rather than on January 1, 2014, as originally planned, the second time in as many months he has tried to beat consumer planning with surprise sin tax raises.

The hike will see taxes on alcoholic beverages raised by 25 percent and a uniform tax based on alcoholic content of the beverages. A flat tax of NIS 84 per 100% of alcohol per liter will be raised to NIS 105, meaning a liter of 5% alcohol beer would now have a tax of NIS 5.05.

The total annual revenue increase is expected to be between NIS 200 million and NIS 350 million ($55 million to 95 million).

The move is the latest in a series of tariff hikes levied over the past several months as the government attempts to rein in a large deficit. Many of the tax raises have centered on alcohol and cigarettes.

In early May, Lapid sprung a surprise tax on tobacco, raising the tariff from NIS 2.5 to NIS 3 per pack several hours after announcing the move.

Last year, the previous Netanyahu government levied an ad hoc tax on alcohol and tobacco products, raising the purchase tax on beer from NIS 2.18 to NIS 4.25 per liter. Bars and stores raised prices shortly after the hike was proposed by then-finance minister Yuval Steinitz.

In April, Ofer Ronen, co-owner of the Srigim Brewery outside Jerusalem, told The Times of Israel that his business had been feeling the pinch of plummeting demand and price hikes since last July.

“All of our business planning was based on the previous tax [of NIS 2.18 per liter],” he said, and the tax hike was going to cut deeply into his year-old business’s profits, crippling the venture.

In another effort to ease economic troubles, the Knesset Finance Committee on Tuesday voted to raise the deficit target for 2013 from 3% to 4.65% of the GDP, and for 2014 from 2.75% to 3%. The first reading of the bill also passed the Knesset and will be submitted for a second and third hearing.

According to Israel Radio, Lapid told the committee hearing that political timetables have made the current fiscal year essentially a “wasted year” and as a result the economy did not meet its revenue forecast.

Opposition leader Shelly Yachimovich, head of the Labor Party, warned that if the government failed to meet the new deficit target, it would be forced to impose more budget cuts and raise additional taxes.

According to a Finance Ministry report released in January, the 2012 budget deficit target was approximately 2%, but higher spending and lower-than-expected tax revenues resulted in a 4.2% margin between government income and spending.