The Israel Cancer Association (ICA) appealed to the High Court on Wednesday requesting to cancel the tax exemption on smoking products at duty-free shops after the decision wasn’t included in the government’s revised 2024 budget. The ICA argued that "the public interest has been taken over."
The ICA, through the S. Horowitz law firm, seeks the country to issue conditional orders to fully and immediately cancel the tax exemption on smoking products entering Israel. "This is a life-threatening subsidy that creates a severe distortion with no substantive justification."
"The damage from duty-free cigarettes is identical to the damage from cigarettes elsewhere and has the same destructive consequences,” the appeal submitted against the Finance and Health ministers, Knesset Finance Committee, and the Israel Airports Authority (IAA) read.
The revised 2024 budget proposal included a Finance Ministry-initiated bill to increase the tax on all smoking products by 10%-20%, which has come into effect. It also proposed canceling the tax exemption on cigarettes and other smoking products in duty-free shops and personal imports from abroad. However, the proposal didn’t take effect due to opposition from some Knesset members during Finance Committee discussions.
During the heated discussions in the Finance Committee, MK Eliyahu Revivo admitted he would block the cancellation of the tax exemption in duty-free shops to protect employees of the IAA , as they make a part of his voter base.
The Israel Cancer Association wrote, "The dramatic change in the bill — resulting in severe harm to public health — stems from an improper 'deal' made behind the backs of professional levels in government offices and outside the Finance Committee, resulting from the finance minister's [Bezalel Smotrich] blatant submission to the external consideration of a Finance Committee member, who openly declared he prevented the implementation of the original order to benefit IAA employees, who are his voters at the party’s primaries election."
The ICA’s appeal further detailed that in January 2024, the government instructed the cancellation of the tax exemption in duty-free shops. "Before the ink dried on the original bill, however, the finance minister suddenly decided to back away from it and put a different order — the second order — in action, which completely deviates from the government's decision.”
It added, “According to the second order, the tax exemption will only be canceled in four years, meaning in 2028; meanwhile, the tax exemption will remain the same for the next two years and be halved in mid-2026."
The ICA also argued that the second order also expired last week, "since it wasn’t approved by a Finance Committee decision, as required by law for it to take effect from that date onward."
The appeal further read, "The government decision instructs the finance minister to use the authority granted to him by the Purchase Tax Law and fully and immediately cancel the tax exemption given for smoking products brought into Israel by Israelis at border controls, including the exemption granted for smoking products purchased by Israeli residents in duty-free shops.”
“This appeal is submitted because the tax exemption has not been canceled, as required by law, government decision, and common sense, thus the catastrophic damages to public health and the public coffers continue to accumulate," the appeal argued.
The ICA claims that smoking products in Israel —where the smoking rate is particularly high and exceeds the OECD average by 30% — claim the lives of approximately 8,000 individuals annually, cause severe illnesses, and significantly shorten the average smoker's lifespan by 10-15 years.
The appeal further argued that "for years, smoking products brought into Israel by Israelis returning from abroad, including those purchased at duty-free shops, have been tax-exempt and sold at prices tens of percent lower than anywhere else in Israel... As a result of the deep subsidy for smoking products, duty-free shops have become the largest retailer of smoking products in Israel, holding about 10% of the cigarette market consumed in Israel.”
“This subsidy is life-threatening and has no substantive justification. A cigarette purchased at duty-free shops is as harmful as a cigarette purchased anywhere else in Israel, with the same destructive consequences,” it added.
The ICA added that given the harm to the public interest, it’s just and proper to instruct the finance minister to issue an order immediately canceling the tax exemption, in accordance with the government's decision and the original bill.
Health Minister Uriel Busso's office issued a statement saying, "Smoking is one of the most significant threats to public health, and we’re working to reduce the number of smokers in the population on the one hand and to prevent new individuals from starting to smoke on the other hand.”
“The Health Ministry will continue to lead the fight against smoking and will promote measures including advertising and marketing restrictions, business licensing, data collection, and more,” the statement added.