Whiskey Diplomacy

The British kingdom is concerned about your liquor cabinet and wants to ensure it stocks fine, aged whiskey. The British ambassador to Israel, Tom Philips, even went a step further. Last Thursday, he wrote to the Finance Ministry regarding the taxes the state levies on whiskey, especially Scotch whiskey, complaining of discrimination: Scotch whiskey is taxed more than other alcoholic beverages.

The Tax Authority acknowledged that abroad, they know not only how to produce better beverages, but also how to tax them in a less complicated way. The Israeli alcohol taxation system is considered particularly complex ("a crazy method" according to some in the Tax Authority) and is dependent, among other things, on the type of beverage and the percentage of alcohol it contains. In practice, top-shelf liquors including whiskey are taxed at a higher rate than inexpensive alcoholic beverages. But the method is so complex that sometimes the price changes while the beverage is still in transport.

The method dates back to the establishment of the state, when the prevailing mindset was that anyone who can allow himself the luxury of whiskey can also pay the tax. Currently, the Tax Authority makes decisions based on which drinks would be served in pubs and which bottles are for home consumption.

One of the obstacles to reducing the whiskey tax comes from the reasoning that lowering taxes on alcohol will encourage more drinking. Yet it turns out that 75 percent of the whiskey consumed in Israel is purchased at duty-free stores - which are tax exempt.

At the moment, the Tax Authority is also hoping for a change. The senior deputy director general of the Tax Authority, Boaz Sofer, explains that in the end, Israel will begin using the tax method common abroad: both whiskey and vodka, which both contain 40 percent alcohol, will be taxed at the same rate, regardless of their cost or quality.

Don't be confused: the Tax Authority does not really care whether you drink single malt Scotch or vodka that sells for $20 a liter. It cares only about the economic rationale: the more alcohol a beverage contains, the greater its influence and therefore the higher the tax, regardless of where the beverage was produced.