The duty-free shops at Ben-Gurion International Airport are arguably the one place in Israel where smoking is encouraged and where duty-free pricing works to the greatest extent at cross-purposes with the government’s goal of discouraging Israelis from smoking cigarettes.
The sale of duty-free cigarettes undermines the two goals that the government has in taxing cigarettes. One is to make cigarettes expensive enough that it will encourage Israelis to smoke less or even better to quit smoking or not even start with the habit. It also is designed, to the extent the people insist on buying cigarettes, to generate tax revenue to help pay for the major harm that smoking inflicts on the public’s health.
Duty-free shops sell huge quantities of cigarettes at prices that are considerably lower than those beyond the confines of the airport. James Richardson, which sells duty-free tobacco, alcohol and perfume among other products at the airport, is a privately owned company and therefore does not report its earnings, but it can be assumed that tobacco represents its the greatest single category of product sales at Ben-Gurion Airport, accounting for revenues of hundreds of millions of shekels a year.
Cigarettes get star billing at James Richardson’s huge Terminal 3 store at the airport, and shoppers’ attention is drawn to them with signs about promotional pricing and discounts on cigarettes beyond the fact that they are sold tax-free.
It’s customary for Israelis to leave bulky duty-free purchases at the airport on the way out of the country and reclaim them when they land at Ben-Gurion on their return, but when it comes to cigarettes, it’s worth bearing in mind that Israeli law limits individuals to bringing a single carton of ten packs of duty-free cigarettes into the country. That makes it a bit strange to see promotions that encourage the purchase of quantities well beyond a single carton.
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The explanation is that there are no limitations on the quantities that can be purchased, but only on the quantities that can be brought back into the country. It is the responsibility of the customs authority to catch those bringing in more than one carton per person.
The economic interest of the Israel Airports Authority in this regard is clear. It is sustained from the royalties that it earns from duty free sales. As a result, the authority fought tooth and nail a few years ago when the Israel Tax Authority lowered the quantity of duty-free cigarettes that could be brought back into the country from two to one per person.
Proposed legislation sponsored by Eitan Cabel (Zionist Union) and Yehudah Glick (Likud) wouldn’t eliminate the sale of duty-free cigarettes but it would bar a major retailer such as James Richardson from selling them in their main store and relegate them to a less prominent location. The airports authority has been fighting this legislation as well, legislation that was the subject last week of hearing in the Knesset Economic Affairs Committee.
Though it is a public agency, it has been working at cross-purposes with the government’s promotion of public health. The airports authority’s stance borders on the illegitimate. Public agencies should put the public’s interest ahead of their own economic ones.