In Blow to Philip Morris, Israel to Tax iQOS E-cigarettes Like Ordinary Cigarettes

In a blow to Philip Morris, the iQOS device will be taxed at 65 percent, a statement by Israel that e-cigs are as damaging to health as traditional cigarettes

A man poses for a photograph while using a Philip Morris iQOS smoking device, in Bogota, Colombia November 14, 2017.
\ JAIME SALDARRIAGA/REUTERS

Finance Minister Moshe Kahlon has dropped his long-standing opposition to an excise tax for iQOS, the smokeless cigarette made by Philip Morris.

As a result, the device will be taxed like ordinary cigarettes, at a rate of 65% of its price. However, the excise tax was introduced through the state budget, under pressure from the attorney general. The move presumably forces Kahlon to sign an order that has been on his desk since August, although several steps remain until it goes into force.

Kahlon effectively accepted the position of the Health Ministry and the Israel Tax Authority. His decision is also a statement by Israel that it views the damage caused by iQOS to be equal to that caused by traditional cigarettes. It is a tough blow to Philip Morris, which has fought vigorously for months against taxation, or at least for a lower rate than normal cigarettes.

Kahlon had declined to sign the excise tax order, after it went through the governments approval process. He stood his ground even after the attorney general informed him that he could not defend Kahlons position in court. Kahlon also did not explain his decision when asked about it by the press or the Knessets Committee on Drug Abuse.

iQOS, the flagship product of Philip Morris, is a new, battery-powered handheld device that heats tobacco rather than burning it. The tobacco sticks used in the device are currently sold tax-free, while traditional cigarettes are taxed at 65.5% of the retail price.

This decision proves once again that anyone who doesnt give up and fights for his principles wins in the end, MK Tamar Zandberg, chairwoman of the Special Committee on Drug and Alcohol Abuse, said Sunday.

When we started talking about this, they told us that we had no chance of standing up to the tobacco corporations. Later, they started being afraid, and now we are nearing victory. We shall continue in the Knessets drug and alcohol committee to follow closely, and, as usually, we will never give up until victory, Zandberg added.

The decision likely renders superfluous a lawsuit filed by the Association for Progressive Democracy and Smoke Free Israel. We welcome the decision to regulate iQOS cigarettes that are tobacco products in every way, commented Shira Kislev, the CEO of Smoke Free Israel.

Shabi Gatenio, the director general of the Association for Progressive Democracy, said the court case was still set for February 26, but that his organization saw the move as an important step in the right direction. He noted he would remain cautious until Kahlon signs the order and it gets approved by the Knesset Finance Committee.

Experience tells me there are too many steps in which lobbyists are liable to try to torpedo the process and ruin the joy and the health interest of Israeli citizens, Gatenio added.

MK Yehudah Glick, who has advocated taxing iQOS, was already looking ahead the next battle. Its wonderful that Israel equalizes the iQOS tax with the cigarette tax, but it doesnt do the same for rolling tobacco when its clear that rolling tobacco is no less hazardous and even more so than electronic products. Glick added that medical and economic experts all recommend making the tax for rolling tobacco the same as for cigarettes.

Dr. Hagai Levine, secretary of the Israeli Association of Public Health Physicians, said iQOS cigarettes are addictive, harmful and a danger to the Israeli public. Its a shame the decision was made so late and inexplicably by the finance minister, and only after such a long struggle by us and civil society, he said. We fear that passing legislation indirectly through the Arrangements Law, and not properly though an order by the finance minister, will cause a dangerous delay in implementing the decision.