Beer tax hike turns law
In order to stuff the big holes in the country’s budget, the Israeli Parliament, the Knesset, has doubled the sales tax on beer. On 23 April 2013 the Knesset’s financial committee decided to increase the sales tax on beer to NIS 4.20 (EUR 0.90) from NIS 2.18 (EUR 0.46) per litre, despite sharp criticism from industrial brewers and noisy protests from the many smaller breweries, which in Israel are called "beer boutiques". The Finance Ministry expects the sales tax increase to sweep about an extra EUR 60 million into their coffers.
The radical tax increase was already introduced about a year ago through a temporary regulation. This has now been replaced by a law. The beer lobby has been ineffective in preventing this damaging tax hike, unlike the students, who through their protests managed to convince politicians not to hike the already exorbitantly high tuition fees.
Sadly, though, for their favourite drink, students will have to dig deeper into their empty pockets. Instead of the previous NIS 12-13 (EUR 2.80) per bottle of beer, they will have to continue forking out NIS 15-16 (EUR 3.40).
The country’s major brewers, the Central Bottling Company (whose licensed brands include Coca-Cola and Carlsberg) and Tempo (in which Heineken holds a stake) with a combined market share of around 98 percent, may be able to absorb some of the tax increase. But it’s the two dozen or so microbreweries which will suffer the most. With the prices of draught beer such as Goldstar (manufactured by Tempo) set to rise to NIS 30 (EUR 6.40/USD 8) and a craft beer to NIS 34 (EUR 7.20/USD 9) per half-litre, the new tax may also drive consumers to purchase more of the larger brewers’ products.
By waving through this tax hike, Israeli politicians give lie to their argument that the ensuing price increase for beer will help fight alcoholism. In pubs across the country a small glass of beer with 4% to 5% ABV costs as much as a glass of Arak, a local spirit, with 40% to 50% ABV. "Boozers will now switch to hard spirits permanently”, brewers fear.
Besides, Israel is not really a country of beer guzzlers. Beer production stood at merely 1 million hl in 2011 according to the Barth Report, which translates into a per capita consumption of 13 litres.
Israel’s brewers employ about 2,000 people, many of whom will face redundancy especially those employed by the smaller operators. The jobless rate stood at 6.7 percent of the labour force at the end of February this year. Many brewers wonder why the sales tax was doubled on beer but not on wine? The taxman’s response: because there is no sales tax levied on wine at all.
