Israel’s Tax Authority has acknowledged for the first time that the state is collecting zero shekels from tax on e-cigarette vaping liquids. The current levy, set in 2021 at 20 shekels per milliliter, is described by the article as the world’s highest, but officials now say it has helped create a huge black market rather than curb youth smoking.
Under the existing rules, a standard 20-milliliter bottle of vape liquid carries 400 shekels in excise tax, while similar products are sold in kiosks for about 120 shekels, showing that the legal supply chain is not paying the tax. A senior Tax Authority official told ynet, “We definitely made a mistake at the time in setting the tax rate, and we are now asking to correct it with a very significant reduction. We also made a mistake by not imposing a tax on the vaping device in the original law, which we are proposing to do now.”
The official said no one is paying tax on vape liquid, most sellers cannot be traced, and criminal groups have taken over the market. He warned that there is no oversight of the liquid and said teenagers are buying dangerous material from criminals, Israelis and Palestinians alike. The authority says smuggling one liter from the Palestinian Authority can yield 20,000 shekels in tax under the current law. By comparison, cigarette tax brings in about 9 billion shekels a year.
After two years of work, the Tax Authority has proposed cutting the liquid tax to 1 shekel per milliliter, in line with Europe, and adding a fixed 30-shekel tax on each device. That would leave a total tax burden of 50 shekels per purchase and, officials say, make smuggling and pirated production unprofitable. The new model would also force convenience stores and kiosks to prove legal sourcing, while around 5 million devices are imported into Israel each year untaxed. The authority expects about half a billion shekels in revenue in the first year and as much as 1 billion shekels later, but the bill is stalled in the Knesset’s Finance Committee, where lawmakers and health groups argue it would amount to a tax cut for smokers ahead of elections. Committee chair MK Hanoch Milwidsky suggested 35% of the new revenue should fund youth anti-smoking campaigns. The committee has not set a new hearing date. A 2025 European TCS report gave Israel 54 out of 100 on anti-smoking efforts, placing it 10th of 37 countries but noting a drop of 5 points on pricing, with the report saying weak regulation has made tobacco products cheaper and more available. Shira Kislev, head of the anti-smoking initiative, said countries that left loopholes in regulation have seen their control policies weakened, and that pricing and taxation are among the most effective tools to reduce smoking and protect minors.
