Israel Approves Fuel Tax Cut to Offset Price Surge Ahead of Elections

Israel's Attorney General Gali Baharav-Miara has approved a temporary reduction in excise tax on fuel, allowing Finance Minister Bezalel Smotrich to subsidize a recent price increase. This measure is expected to lower the price of a liter of gasoline by 50 agorot (about $0.14), from the current 8.25 shekels to 7.75 shekels. The price reduction will take effect immediately upon the minister's signature on the order.

The Ministry of Finance's legal advisor had previously issued an opinion stating that the tax reduction is permissible despite its proximity to the upcoming elections on October 27. This opinion cited a precedent from when Avigdor Lieberman served as Finance Minister, during which excise tax on fuel was also reduced shortly before an election.

The measure, promoted by the Finance Ministry, is intended to be temporary, lasting for two months until October 31, a period extending slightly beyond the election date. Smotrich directed the tax cut to absorb the sharp rise in fuel prices that occurred at the beginning of September, aiming to return the price to 7.75 shekels per liter.

The price of 95-octane gasoline at self-service stations had jumped to 8.25 shekels on September 1, matching a record high from September 2012. This increase was attributed to a combination of rising global gasoline prices, refinery margins, the dollar-to-shekel exchange rate, the linking of excise tax to the consumer price index, and adjustments to distribution and service fees.

While the timing of the reduction, close to elections, could be perceived as a political move to benefit Smotrich's party, which is currently polling below the electoral threshold in some surveys, the Finance Ministry argues it is also a necessary step to curb broader inflation. The sharp rise in fuel costs impacts transportation and distribution, potentially leading to increased prices for food, deliveries, and other services. By reducing the fuel tax, the ministry aims to prevent a further wave of cost-of-living increases over the next two months.