Cut in Maximum Duty-free Cigarette Purchases Likely to Be Delayed Due to MKs' Pressure

Reduction from four cartons to two cartons probably won't take effect until mid-2013.

A delay is being sought in the reduction of maximum duty-free cigarette purchases from four cartons to two cartons at Ben-Gurion International Airport and land border crossings.

The proposed reduction will not take effect until the middle of next year under the compromise, which was reached by representatives of the Knesset Finance Committee and the Finance Ministry. The deal is due to come before the full committee at its meeting on Monday.

The committee will also consider a tax hike on cigars, pipe tobacco and water pipes. The compromise on the limitations on duty-free cigarettes followed pressure from Knesset members who balked at imposing the two-carton limit earlier.

Finance Minister Yuval Steinitz signed an order in December raising the customs duties on pipe tobacco, cigars and cigarillos. Two weeks ago, when it still appeared elections would be held in September, the Knesset Finance Committee was the scene of a stormy session in which opponents to the changes in custom fees had their say. On Sunday, coalition chairman Zeev Elkin (Likud ) said the coalition opposed Steinitz's imposition of higher taxes on tobacco products. In the face of the opposition, Steinitz reluctantly agreed to the compromise and delay.

Lobbyists from James Richardson, which operates duty-free stores in Israel, also pressured Knesset members to back off the plan. The retailer argued that it had a lease with the Israel Airports Authority and its rights as a tenant would be harmed by a tax increase or limitation on duty-free sales. The cigarette industry also lobbied the committee not to change the law.

The Philip Morris tobacco firm had representatives at the committee meeting but said they were only there to monitor developments, not to lobby Knesset members.

The Israel Airports Authority also argued against toughening conditions for tobacco sales, saying it would hurt the authority's revenues.