Israel Advances New Tax Bill on Vapes and Nicotine Products
The Israeli Ministry of Finance is advancing a new bill to impose taxes on vapes, tobacco pouches, and nicotine pouches. Under the proposed plan, the tax rate for vape liquid is set at 1 shekel (approximately $0.33) per milliliter, 10 shekels (approximately $3.33) per device, and approximately 350 shekels (approximately $116.55) per kilogram for tobacco and nicotine pouches.
Key Points at a Glance
- The Israeli Ministry of Finance is moving forward with a new bill to tax vapes, tobacco pouches, and nicotine pouches.
- Reports indicate that, following approval by the Knesset Finance Committee, the measure requires only the signature of Finance Minister Bezalel Smotrich to take effect.
- The new proposal sets this tax on vape liquid at 1 shekel (approximately $0.33) per milliliter. The tax on vape devices at 10 shekels (approximately $3.32) per unit, and the tax on tobacco and nicotine pouches is approximately 350 shekels (approximately $116.34) per kilogram.
- The Israel Tax Authority has published a draft of the bill and has commenced a public consultation period.
- Reports suggest that one of the objectives of this reform is to combat black market trade in vapes and enhance compliance within the legal market by adjusting the tax burden structure between devices and e-liquids.
Israel Moves Forward with Vape and Nicotine Tax Plan
April 22, 2026. According to a report by Vesty, the Israeli Ministry of Finance is advancing a new bill aimed at imposing taxes on vapes, tobacco pouches, and nicotine pouches.
Bill Awaits Final Approval from Finance Minister
Reports indicate that, following approval by the Knesset Finance Committee, this initiative requires only the signature of Finance Minister Bezalel Smotrich to come into force.
The Israel Tax Authority has published a draft of the bill and has announced the commencement of a public consultation period.
Proposed Tax Rates for Vapes and Nicotine Products
According to the proposed legislation. The tax on vape liquid is set at 1 shekel (approximately $0.33) per milliliter; the tax on vape devices is set at 10 shekels (approximately $3.32) per unit; and the tax on tobacco and nicotine pouches is set at approximately 350 shekels (approximately $116.34) per kilogram.
The report further notes that the government intends to lower the tax rate on vape liquids while simultaneously introducing taxation for the new category of tobacco pouches.
Fast-Track Implementation Through Ministerial Authority
The report indicates that once the Finance Minister signs the relevant order. The measure can take effect via an expedited procedure, bypassing the standard legislative process involving three parliamentary readings.
This expedited approach is permissible because the Finance Minister possesses the authority to set tax rates—a power previously exercised during the adjustment of the VAT exemption policy for personal imports.
The sole condition for the measure to take effect is approval by the Parliament’s Finance Committee.
Parliamentary Oversight and Potential Objections
The report states that if members of the Finance Committee object to the proposed order, a simple majority vote in a plenary session of Parliament would be required to overturn the Finance Minister’s directive.
The report also notes that Parliament has previously utilized this procedure to address an order issued by the Finance Minister regarding an increase in the VAT exemption threshold for personal imports.
Regulatory Goals: Strengthening Oversight and Reducing Illicit Trade
The report indicates that this legislation will also serve to strengthen regulatory oversight regarding the taxation of vapes.
Previously, provisions concerning this regulatory oversight were removed from the bill because they lacked a direct nexus to the national budget.
Now, following the Finance Minister’s signing of the order, these regulatory provisions will be deliberated separately by the Parliament’s Finance Committee.
Expert Recommendations to Restructure Vape Taxation
The report notes that the government is moving forward with significant adjustments to the taxation framework for vapes and novel smoking products, based on the conclusions of an expert committee and subsequent government decisions.
Previously, vape taxation policy focused primarily on the liquid component, applying a tax structure analogous to that of traditional cigarettes and roll-your-own tobacco.
However, the expert committee concluded that the vape itself constitutes a distinct product category, and that the liquid, in terms of both manufacturing cost and usage, does not constitute the primary component of the device.
Consequently, the committee recommended that the device and the liquid be taxed as a single, integrated unit, and proposed adjusting the tax rate structure accordingly.
Policy Aims to Curb Black Market and Boost Compliance
Reducing taxes on e-liquids while introducing a new tax on devices is viewed as a strategy to facilitate a return to the legal market.
Reports indicate that one of the primary objectives of this reform is to eliminate the black market.
Previously, the high tax rates imposed on e-liquids drove many market participants to operate illegally or within a “gray zone.”
The government believes that by lowering taxes on e-liquids while simultaneously taxing devices, law-abiding businesses will be enabled to re-enter the legal market, thereby enhancing overall compliance with regulations.
