Israel's Finance Minister Uses Election Ad to Announce Fuel Tax Cut

Israeli Finance Minister Bezalel Smotrich has launched an election campaign video featuring himself at a gas station, manipulating a sign to show a reduced price of 7.75 shekels per liter, down from 8.25 shekels. The ad aims to portray Smotrich as actively lowering the cost of living. The fuel tax reduction, which took effect on September 7 and will last until October 31, four days after the October 27 elections, is expected to cost the state approximately 282 million shekels in lost revenue. This measure effectively provides a discount to drivers, with a 50-liter fill-up saving 25 shekels, though the article notes this money is not disappearing but rather shifting from state coffers to drivers' pockets.

Smotrich's move follows a precedent set by former Finance Minister Avigdor Lieberman in 2022, who also temporarily reduced fuel excise taxes amid rising energy prices. While legally defensible due to Lieberman's action, Smotrich's current tax cut is occurring when Israel faces a significant deficit of around 72.9 billion shekels, contrasting with Lieberman's decision when the state had a surplus. The article questions the allocation of the 282 million shekels, suggesting it could have been used to reduce the deficit or fund other public services.

Furthermore, the digest criticizes the universal nature of the fuel tax cut, arguing it disproportionately benefits higher-income individuals who drive more and own larger vehicles, while offering no aid to those without cars. It also points out that diesel vehicle drivers, such as taxi and truck drivers who might need the relief most, are excluded as the reduction applies only to gasoline. The International Monetary Fund has previously warned that broad fuel subsidies are an inefficient tool for aiding vulnerable populations, with a large portion of the benefit going to high earners.

Alternative solutions proposed include a more targeted approach, such as direct payments to low-income households or essential commuters, which would be more socially beneficial and cost-effective, though less visually impactful than Smotrich's gas station stunt. The article also mentions past investigations into fuel marketing margins that could have led to price reductions, but these efforts have stalled.