Israel Cuts Fuel Tax, Slashing Gas Prices by Half a Shekel

Effective at midnight, the price of gasoline in Israel has been reduced by half a shekel per liter, bringing the cost of 95-octane self-service fuel to 7.75 shekels in central Israel. This decrease follows an unusual legal approval for a reduction in excise tax, particularly significant during an election period. The move aims to provide immediate relief to the public, who recently faced record-high fuel prices, with the price reaching 8.25 shekels per liter, matching a historical peak from September 2012.

The recent surge in fuel costs was attributed to a roughly six percent increase in international gasoline prices, a routine adjustment of excise tax based on the index, and rising marketing margins and service fees due to minimum wage hikes. This followed an eight-month trend of price increases, totaling nearly 1.5 shekels per liter, influenced by global energy market volatility and conflicts impacting supply routes.

Finance Minister Bezalel Smotrich's proposal to lower the excise tax initially met strong professional opposition from within his ministry, including the budget department and tax authority. These bodies warned that such an intervention would widen the deficit by approximately 155 million shekels monthly and cautioned against non-urgent measures by a transitional government, citing guidance from the Attorney General.

However, the path for the reduction was cleared after the Finance Ministry's legal counsel, Dudi Koppel, argued to Deputy Attorney General Avital Sompolinsky that the measure was an urgent necessity to alleviate public burden. The legal opinion was ultimately approved, allowing the tax cut to be implemented. The reduced price is expected to remain in effect until at least the end of October. In Eilat, which is VAT-exempt, the self-service price has dropped to 6.49 shekels per liter.