In the shadow of war – Tobacco Reporter

Because normal supplies have been disrupted due to the conflict between Hamas and Israel, a carton of cigarettes in Gaza costs $30.

TR employee report

Cigarette consumption has increased in the Israeli market as the stress and fear caused by the war have taken a toll on the population, especially soldiers and their families. On the other side of the barricades, traders are selling their cigarettes at some of the highest prices in the world, according to observers.

Import dynamics and tax revenues are two key indicators that describe the current situation on the Israeli cigarette market.

In 2022, tobacco companies paid NIS 7.5 billion ($2 billion) to the state treasury, according to the tax authority. Import volumes remained constant throughout most of 2023 until October, when they rose 21.5 percent, official data showed.

A senior official in the customs brokerage industry speaking to a local publication Finance Wallasaid that the war could potentially contribute an additional NIS 500 million to the state budget thanks to increased cigarette sales.

Tobacco use in Israel has long been the subject of increased attention and great concern among government officials and anti-smoking organizations.

According to a 2021 report by the Taub Center for Social Policy, nearly 20 percent of Israeli adults use tobacco, which is higher than the Organization for Economic Co-operation and Development average. A quarter of men and 15 percent of women smoke, with the rate higher among Arabs than Jews.

The Israeli Ministry of Health estimates that tobacco consumption in the country declined between 1998 and 2019. Although the Covid-19 pandemic triggered a slight increase in cigarette consumption, the effects do not appear to be comparable to those of the Gaza war.

Hedva Elmackias, deputy director of finance and marketing at the Taub Center, said Tobacco Reporter that no current information is available to assess the impact of the Gaza war on the tobacco market in Israel.

However, the Gaza war has pushed tobacco sales in the country to levels not seen in a long time. The connection is obvious: people are smoking more to combat stress and anxiety.

“The situation is obviously incredibly worrying,” said Yahel Silberberg Vulej, a spokesman for Philip Morris International Tobacco Reporterand declined to discuss what impact the war had had on the company’s business in the country. “During this situation, our priority has been to take care of our people and make sure our colleagues and their families are safe,” he added.

Nevertheless, the impact of the war on Israeli tobacco sales is undeniable.

“Since the war began, a lot of money has flowed into our business, millions of additional shekels,” said What Alon, the owner of a cigarette and smoking goods store, Finance Walla.

In physical terms, cigarette sales in Israel increased to almost 400 million packs, up from 352 million packs in the previous year, according to official statistics. This corresponds to 8 billion cigarettes.

While the tax increase may be beneficial to the tobacco industry in the short term, economists point out that the long-term impact of the current developments in the Israeli tobacco market requires urgent attention and action from authorities and social organizations.

The Abrahamson Network of Addiction Treatment Centers provides free smoking cessation treatment to any soldier at any of its eight locations in Israel.

“This is a volunteer program involving all 50 company employees, therapists, service and support staff, nutritionists, and Abrahamson’s operations and logistics team,” said company CEO Ehud Abrahamson.

The most expensive cigarettes in the world

Meanwhile, cigarettes are being sold at record prices in the Gaza Strip.

According to the Palestinian Ministry of Health’s 2022 Progressive Survey of Chronic Diseases, the proportion of smokers in Palestine is the highest in the Middle East, at about 34 percent.

The survey results show that 55.1 percent of men and 12.1 percent of women are smokers and more than a third of smokers are young people between the ages of 18 and 29.

While reliable data on the impact of the war on tobacco consumption in Palestine is scarce, local resident Ayad Thabet Al-Akhbar that the proportion of smokers has increased sharply since the beginning of the conflict, which paints a bleak picture of the situation.

And this despite the fact that a single cigarette on the Gaza market can cost $30, according to local press estimates.

Currently, the tobacco market in Gaza consists mainly of low-quality cigarettes of unknown origin that are smuggled from Egypt. International brand cigarettes have been hard to find here since the beginning of the conflict. The market is also highly speculative.

A local cigarette seller told Al-Akhbar: “A few days before Hamas agreed to the Egyptian ceasefire proposal, a cigarette cost 30 NIS ($8). Minutes after Hamas agreed, the price fell to 20 NIS, and after Israel and Netanyahu stubbornly rejected the ceasefire, the price rose to 100 NIS.”

However, when it came to cigarette consumption, he argued that it had fallen dramatically due to a lack of supply and because people had no money to spare. He estimated that before the war he sold 40 packs of cigarettes a day, but now he would be lucky if he sold two packs.

Cigarettes have become a new gold in Gaza, a UN official described the current market situation to The Wall Street Journal.

Juliette Tourwa, communications director of the United Nations Relief and Works Agency for Palestine Refugees in the Near East, said Tobacco Reporter that the organization does not have reliable information on the situation of the tobacco market in the Gaza Strip.

Cigarettes are smuggled into the Gaza Strip mainly from Egypt, sometimes even in humanitarian aid trucks. According to some reports, the flow of smuggled cigarettes has decreased somewhat since the Israeli army attacked Rafah in early May.

The resale of cigarettes has become an extremely dangerous profession in the Gaza Strip, as sellers are often targeted by desperate consumers.

Khaled Omar, another resident, said Al-Akhbar As far as the tobacco market is concerned, Gaza is “like another planet” because the price of a pack of international brand cigarettes can reach up to $600. He believes that there is no other place in the world where the price is so high.

Omar also blames unscrupulous sellers for market manipulation and believes that they are “waging war against the Palestinians just like the Israeli army.”

Revival of the illegal segment

It is not only the Gaza Strip that has seen an increase in cigarette smuggling as a result of the ongoing war. The increase in tobacco sales in Israel and the general turmoil caused by the war have also reportedly led to an increase in cigarette smuggling into the country.

In 2023, Israeli customs seized 36 containers full of smuggled cigarettes, compared to just 17 the previous year. Law enforcement authorities also warned that cigarette smuggling had become particularly common at airports and Israel’s land borders with Jordan and Egypt. In addition, thousands of packs of illegal cigarettes are regularly seized at seaports.

Cigarette smuggling has become increasingly lucrative for criminals in recent years as the price gap between heavily taxed cigarettes in Israel and those in neighboring countries – not only Jordan and Egypt, but also European countries – is growing.

In 2024, the tobacco market will have to prepare for another tax increase. The sales tax on cigarettes will rise from 270 percent and a price of NIS 444.03 per thousand cigarettes to NIS 850.62 per thousand cigarettes, to 270 percent and NIS 524.50 per thousand cigarettes, to no less than NIS 930 per thousand cigarettes.

The purchase tax on processed tobacco is also to increase from 270 percent and NIS 634.34 per kilogram to NIS 1,215.18 per kilogram, and from 270 percent and NIS 749.29 per kilogram to NIS 1,328.57 per kilogram.

In addition, the sales tax will be increased on other tobacco products, including tobacco heaters that use tobacco units and tobacco heaters that use tobacco. A tax of NIS 113.39 per kilogram will be imposed on packages of loose cigarette tobacco.

By the end of 2023, cigarettes will cost 80 to 100 percent more in Israel than in its neighboring countries in the Middle East. The new tax increase is likely to widen the gap even further.

A senior tax authority official told a local news channel: Ynetthat law enforcement authorities are now preparing for an increase in the number of smuggling attempts and cite the current price situation as the reason.