The Tax Authority published a study today (Wednesday) reviewing the impact of the purchase tax imposed on January 1, 2022, on sweetened beverages and repealed on March 30, 2023.
The study shows that the imposition of the tax led to a sharp increase in the prices of sweetened beverages in Israel and at the same time to a significant decrease in their consumption. In contrast, the abolition of the tax led to a decrease in the prices of beverages and an increase in their consumption, with prices for all types of beverages not returning to what they were, nor was consumption of most beverages.
The study shows that the increase in beverage prices following the imposition of the tax exceeded the amount of tax imposed on most beverages, even after adjusting for inflation in those years. Also, after the tax was repealed, the decrease in the prices of the beverages that were taxed was less than the tax burden that was removed from them, even after adjusting for inflation.
That is, in the short term, the full amount of the tax was passed on to consumers and they even took advantage of the imposition of the tax to raise prices, and in the long term, after the tax was abolished, they did not reduce the full amount of the tax in the price to the consumer, so that the decrease in state tax revenue was not fully passed on to the consumer.
It should be clarified that the study refers to final prices for the consumer. The study does not analyze what portion of the price increase following the imposition of a purchase tax on sweetened beverages stems from the wholesale segment and what portion stems from the retail segment.
In terms of consumption, the study shows that after the tax was imposed, there was a decrease of approximately 121% in the consumption of sweetened beverages, and after the tax was abolished, consumption increased by approximately 51%.
In other words, consumption did not return to its pre-tax level, but there was a moderate upward trend. In addition, examining consumption in the Haredi sector alone, it was found that the tax had a greater impact than in the general sector.
The purchase tax on sweetened beverages is set at 1 shekel per liter for sweetened beverages and 6 shekels per liter of concentrate/kg of powder for making a sweetened beverage.
In addition, a tax of 0.7 NIS per liter was imposed on beverages with a sugar content of less than 5 grams per 100 ml of beverage, sweetened beverages containing another sweetener, as well as fruit juices with a sugar content of more than 5 grams per 100 ml of beverage, and 4.2 NIS per liter of beverage concentrate.
The additional state revenue from this tax in 2022 was approximately NIS 900 million. Depending on the increase in prices and the index, if the tax had been implemented in 2025, the increase in state revenue would have been approximately NIS 1.05 billion.
The study was authored by Rivka Efremov, Yulia Unger, and Tal Cohen-Tefer from the Planning and Economics Division at the Tax Authority.
