Cigarette Imports Soar After Tax Is Equalized

Anti-smoking activists accuse companies of luring smokers with discounts

FILE Photo: Cigarettes are sold in a Tel Aviv tobacco shop, March 3, 2018.
Ofer Vaknin

After years of seeing sales rise for rolling tobacco, Israelis are back to lighting up packaged cigarettes after taxes on the two products were equalized in February. Anti-smoking activists blame the tobacco companies for what they term a “cynical” business maneuver.

Israel had been charging a much lower tax on rolling tobacco, which had caused many smokers, especially young ones, who don’t have money for more expensive smokes, to shun packaged cigarettes and make their own.

But three months ago, Finance Minister Moshe Kahlon signed an order for tax parity between the two categories after the High Court of Justice ruled that since both kinds of tobacco present the same and equal health risks, they should receive the same tax treatment.

The price of rolling tobacco shot up and it wasn’t long before smokers began to switch back to packaged cigarettes. The change is apparent in the Israel Tax Authority’s figures for April, which showed that imports of rolled tobacco plunged 58% from a year ago while imports of packaged cigarettes climbed 13.3%.

E-cigarettes, which aren’t taxed at all, did even better. Tax authority figures show imports soared to $2 million last month from just $847,000 a year ago.

Anti-smoking activists say that while the tax parity order was partially responsible, tobacco importers also played a role by slashing cigarette prices in recent weeks.

“The quiet discounting of cigarette prices is a cynical act by the tobacco companies, whose goal is to snare rolled tobacco users in their nets and make sure they return to buying cigarettes now that the tax has been equalized,” said Shira Kislev, the CEO of Smoke Free Israel.

A spokesman for Philip Morris Israel did not return calls for comment. At Globrands, which imports Camel and Winston cigarettes, a spokesman said that “the reported data are incorrect and inexact,” without further comment.

Like in many other countries, the cigarette tax in Israel is high as part of a policy to discouraging smoking endorsed by medical exports. Studies have shown a direct link between the high price of tobacco and lower rates of cigarette use.

But prices of cigarettes in Israel have been cut over the last few weeks to a range of 26-28 shekels ($7.25-7.80) a package, their lowest in many years, undermining the deterrent effect of taxes.

Philip Morris Israel, for instance, lowered the recommended price for retailers for Marlboro Fine Touch to 28 shekels from a range of 30-34 shekels. L&M cigarettes are selling for a recommended price of 26 shekels, versus a previous 29-34 shekels. Globrands is telling retailers to price Winstons at 26 shekels, down from 31-33 shekels, and 28 shekels for Camels, down from 29-33 shekels.