Israel Considers Fuel Tax Cut Amid Record High Prices

Israel's Ministry of Finance is proposing a temporary reduction in fuel excise tax to alleviate the burden of record-high gasoline prices on households. The price of 95-octane self-service gasoline reached an all-time high of 8.25 shekels per liter in September 2026. The proposal, spearheaded by Ministry of Finance Legal Advisor Dudi Koppel, seeks to lower the regulated price by 0.50 shekels per liter until October 31, 2026.

This move comes after a significant price increase throughout the year, with prices rising 1.40 shekels from 6.85 shekels in January. Factors contributing to the surge include the war with Iran, the closure of the Strait of Hormuz, and rising natural gas prices in Europe. The tax reduction is estimated to cost the state treasury approximately 155 million shekels monthly, totaling around 310 million shekels by the end of the proposed period. Funding is expected to come from a budget surplus resulting from partial utilization of an increased personal import tax exemption.

However, the proposal faces internal opposition within the Ministry of Finance. The Budget Division, the Tax Authority, and the Chief Economist are against intervening in fuel prices, warning of an increased deficit during wartime. They also fear that a temporary reduction could lead to future demands for further cuts. Legal complexities also arise, particularly as Israel is in an election period, requiring the caretaker government to exercise restraint in economic decisions that could be perceived as public benefits.

Despite these concerns, the Finance Ministry's legal advisor believes the sharp rise in the cost of living justifies the measure. He also notes that the current proposal is more limited in scope and duration compared to a similar excise tax reduction approved during the 2022 election period. If approved, drivers could see a 0.50 shekel decrease in the regulated gasoline price, but the decision is still under legal and economic review.