Finance Ministry Legal Advisor Backs Fuel Tax Cut Despite Election Proximity

Dudi Koppel, the legal advisor for Israel's Ministry of Finance, has recommended that the government's legal advisor, Gali Baharav-Miara, approve Finance Minister Bezalel Smotrich's initiative to lower the excise tax on gasoline. The move aims to reduce fuel costs for consumers. The recommendation was reported by Kan News on Wednesday, September 2nd.

Smotrich had previously ordered preparations for a half-shekel per liter excise tax reduction to prevent a price increase ahead of the monthly fuel price adjustment, which is based on global market changes. However, the reduction had not been implemented by the time the new price took effect.

Legal experts noted that reducing taxes less than 90 days before an election could be problematic. In a legal opinion submitted to the Ministry of Justice, Koppel acknowledged that the initiative conflicts with the professional leadership's stance within the Finance Ministry and might be linked to the upcoming elections. Nevertheless, Koppel concluded that there are no legal obstacles to implementing the initiative, citing the need to combat the high cost of living and noting that similar measures were taken in Israel in 2022 and in other countries.

On September 1st, the maximum price for a liter of 95-octane gasoline at self-service gas stations in Israel rose to 8.25 shekels, an increase of 16 agorot from August. This matches the historical high price recorded in September 2012. An additional 26 agorot per liter is charged for full-service. The primary driver for the price hike was a roughly 6% increase in global gasoline prices, only partially offset by a nearly 3% decrease in the dollar's exchange rate. These factors contributed about 10 agorot to the price increase, with approximately 5 agorot attributed to excise tax indexation and 1 agora to a rise in gas station profit margins.