Israelis’ Liquor-buying Spree Comes to an End as Cost of Cheap Drinks Officially Rises

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The last stage of the government’s alcohol tax reform went into effect Sunday night at midnight, increasing the prices of non-premium brands of hard liquor.

Many thrifty drinkers laid in supplies of less-expensive vodka and arak labels, which will take most of the price hit, before the change.

In the past two weeks liquor-store owners have reported being inundated with customers stocking up before the new tax was set to take effect.

“There was brisk traffic with people trying to amass supplies,” according to a clerk at Beit Hayayin, which has branches in Tel Aviv and Herzliya. “Toward the end of the day, we limited customers to three bottles rather than the cases they wanted to buy.”

The first thing to run out was arak, retailers said.

But not all tipplers will suffer: For higher-priced spirits, like whiskey and cognac, prices fell. Wine and beer prices were not affected this time around, nor were prices at duty-free shops.

The reason for the two-way shift is that the new system calculates taxes according to alcohol content rather than price.

One purpose of the reform was to put cheap alcohol beyond the economic reach of minors. But the state is also anticipating a tax windfall, estimated at NIS 250 million in the next six months and NIS 200 million annually from next year.

These figures do not include an estimated NIS 245 million in additional government revenues from changes, introduced three months ago, that raised taxes on beer from NIS 2.18 per liter to NIS 4.19 per liter.

In June Finance Minister Yair Lapid made several changes to the liquor tax reform, causing havoc among importers and distributors who were preparing for the change long in advance. Lapid moved up the final stage of the reform, scheduled several years in advance, from January 1, 2014 to July 1, 2013.

The treasury also decided to increase the amount of tax charged for each liter of pure alcohol content, from NIS 80 to NIS 85 as originally planned to NIS 105. When the reform was moved forward six months Lapid wanted to find a way to keep the price of expensive liquor from declining, but he eventually backed down.

Israel’s alcoholic beverage industry generates about NIS 5 billion a year, not including duty-free sales, according to Dun and Bradstreet. 

Arak drinks on the beach.Credit: David Bachar

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