Israel Approves Fuel Tax Cut Amid Election Concerns

The Israeli government's legal advisor has approved a 50 agorot (cents) per liter reduction in fuel excise tax, a move expected to lower the price of regulated gasoline and offer drivers some relief. This decision follows the legal advisor's acceptance of the Treasury Ministry's position, paving the way for a temporary tax decrease. The measure now requires public comment before Finance Minister Bezalel Smotrich can sign off on it. If finalized as planned, the price of a liter of gasoline could drop from its current 8.25 shekels to 7.75 shekels, potentially taking effect as early as next week.

This reduction comes after a significant rise in fuel prices earlier this year. In January, a liter of gasoline cost 6.85 shekels, meaning the current price is 1.40 shekels higher. Factors contributing to the price increase include the war, the closure of the Strait of Hormuz, and rising natural gas prices in Europe.

The timing of this tax cut has raised legal questions due to its proximity to elections. Government guidelines advise restraint in exercising powers during election periods unless action is urgent. The situation is complicated because the tax reduction deviates from the professional recommendations of the Treasury Ministry's various departments, including the Chief Economist, Budget Division, and Tax Authority. This has led to concerns that the move could be perceived as "election economics."

Previously, the Treasury Ministry's legal advisor, Dudi Koppel, had requested approval for a temporary excise tax reduction on fuel. The original proposal aimed to lower the consumer price by 50 agorot per liter and was intended to last until October 31, 2026.