Israel Cuts Fuel Tax by Half a Shekel Amid Public Outcry

Effective immediately, the price of 95-octane gasoline in Israel will drop to 7.75 shekels per liter following a decision by Finance Minister Bezalel Smotrich to reduce the fuel tax by half a shekel for two months. This measure comes after the price had reached its highest level in over a decade. The tax reduction, which will last until the end of October, aims to alleviate the burden on Israeli citizens and curb indirect price increases across various economic sectors.

The decision follows a recent 16-agorot per liter price hike, bringing the cost to 8.25 shekels, a level not seen since September 2012. This increase was attributed to a global rise in gasoline prices, periodic fuel tax updates, and increased marketing and service costs due to a higher minimum wage. The ongoing conflict with Iran and its impact on global energy prices were also cited as contributing factors.

Smotrich stated that the global fight against Iran, led by the United States, is causing fuel price surges, and his tax cut will help manage inflation and interest rates. The move, however, faced internal opposition from within the Ministry of Finance, including the budget department, the tax authority, and the chief economist, who warned of a monthly state treasury deficit of approximately 155 million shekels. Concerns were also raised about the legality of such a decision by a transitional government.

Despite professional and legal objections, the Ministry of Finance's legal advisor argued that the reduction was an urgent measure to ease public pressure from sharp price increases. He noted that the cut is temporary and financially limited compared to previous tax reductions during election periods. The tax cut ultimately received the necessary legal approval.