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The Knesset Finance Committee retroactively approved an increase on cigarette taxes yesterday and also repealed the tax exemption on biodiesel fuel. The action, which garnered the support of all of the committee members, will not result in an increase in cigarette prices, which already rose four months ago. Taken together, however, the committee vote is expected to increase state revenues by NIS 900 million a year.

The repeal of the biodiesel tax exemption follows testimony by Tax Authority Deputy Director General Eran Yaakov, who said no significant benefit had been shown for the use of biodiesel fuels. A treasury official told the committee the state was losing NIS 200 million a year due to the exemption.

The Manufacturer's Association called for the exemption to be left in place, saying that local production of biofuels was begun in reliance on the tax benefit. The committee decided to proceed with the cancellation of the exemption but agreed to find other ways to address the difficulty that it would cause local producers.

Committee chairman Moshe Gafni (United Torah Judaism ) also ordered the tax authorities to meet with the Dubek tobacco company regarding the firm's complaints over the hike in cigarette taxes. Tax Authority Deputy Director General Eran Yaakov told the committee an agreement had been reached with Dubek providing for a subsequent order cancelling the scheduled January 1 price increase on cigarettes.