Israel Cuts Fuel Tax to Lower Prices Ahead of Elections

Fuel prices in Israel have decreased by half a shekel per liter following the government's approval of a temporary reduction in excise tax. The new price for 95-octane gasoline at self-service stations in central Israel is now 7.75 shekels per liter. This reduction was made possible after the Ministry of Finance, led by Bezalel Smotrich, overcame legal obstacles to sign the decree.

The price cut aims to provide immediate relief to drivers who recently experienced the highest fuel costs in a decade. Just last week, the price had reached a record high of 8.25 shekels per liter, matching the September 2012 peak. This surge was attributed to rising global oil prices, routine excise tax indexing for inflation, and increased service margins due to a higher minimum wage.

The recent price hikes followed an eight-month trend of increasing fuel costs, exacerbated by geopolitical tensions including the war with Iran, the closure of the Strait of Hormuz, and soaring energy prices in Europe. Amid public discontent and with elections approaching, Smotrich pushed for the tax reduction.

Initially, the proposal faced resistance from professional departments within the ministry, including the budget division and the Tax Authority, who warned of a potential budget deficit increase of approximately 155 million shekels per month. Legal counsel also advised caution due to directives concerning the interim government's operational period.

However, the path for the price reduction was cleared when the ministry's legal advisor, Dudi Kopel, argued to the Deputy Attorney General, Avital Sompolinski, that the measure was an urgent necessity to support the public amidst rising expenses. Kopel emphasized that this tax cut would be time-limited and financially constrained compared to previous election-related tax reductions.

The legal service ultimately approved the measure, leading to the current price drop, which is expected to remain in effect until at least the end of October.