Effect of New Alcohol Tax Code Blurry

Finance Minister Yuval Steinitz signed orders on Thursday that change the sales tax structure for alcoholic beverages in Israel.

The move is aimed to bring Israel in line with most Western countries, through the graduated imposition of a tax of NIS 37 per liter of pure alcohol by 2014.

For now, the tax will be at least NIS 15 per liter.

The assumption in the local beverage industry is that the James Richardson duty-free store at Ben-Gurion International Airport will bear the brunt of the new taxes.

Its sales are weighted toward the premium spirits whose prices within Israel stand to decline as a result of the changes.

Also on the hit list are the kiosks and their customers, who will be forced to pay 22% more for cheap vodka, for example. And that brings us to another potential casualty of the tax reform: local liquor producers, who employ about 500 workers in all. Their wares will be dearer, but for now by less than that of their imported counterparts.

Who benefits from the change? Presumably, the importers of the premium brands who can expect to take some of the custom away from the airport duty-free stores, as well as the stores they sell to and the customers of these stores.

Some figures in the industry think the larger importers stand to gain more than the smaller ones from the reform in the tax structure, while others believe the smaller players will not be any worse off than they are at present.