Excise duty abolished, prices partially reduced: IRS study on sugary drinks

The study showed that when the tax was introduced, manufacturers and sellers in most categories increased prices even more than was explained by the tax itself, including taking into account inflation. After the tax was abolished, the situation was reversed: the price reduction was less than the amount of the abolished tax. Thus, the reduction in tax burden was not fully passed on to consumers.

After the tax was introduced, consumption of sugary drinks fell by about 12%. After its cancellation, it increased by about 5%, but did not return to its previous level. In the ultra-Orthodox sector, the impact of the consumption tax was more pronounced than the population average.

The tax was 1 shekel per liter for drinks with a high sugar content and 0.7 shekel per liter for drinks with a lower sugar content, with higher rates for concentrates and powders. In 2022, the tax brought the state about 900 million shekels. The study’s authors estimate that if it were to continue in 2025, revenues could be around NIS 1.05 billion.