Finance Minister Smotrich Moves to Block Fuel Price Hike Ahead of Elections

Finance Minister Bezalel Smotrich held a meeting to discuss a further reduction in fuel excise taxes, following the Ministry of Energy's announcement that gasoline prices are set to increase by half a shekel per liter to NIS 8.27 at the start of October. Professional staff within the ministry oppose the tax cut, but Smotrich, with elections looming, is expected to push the reduction forward.

While tax reductions are generally within the Finance Minister's authority and do not require Knesset approval, this specific measure faces legal and budgetary hurdles. Smotrich has navigated these challenges before, making it likely he will overcome them again. A scenario where he backs down is considered improbable unless he believes his voter base would penalize him for "budgetary extravagance" and that the reduction would harm his election campaign.

The legal obstacle concerns restrictions on government actions during an election period. However, the Treasury's legal advisor previously issued an opinion validating such tax reductions during elections, citing precedents from previous governments, including the Bennett-Lapid administration.

The budgetary challenge involves identifying an alternative funding source for the reduced state revenue. Smotrich's team reportedly has a solution for this, similar to how they addressed a previous fuel subsidy costing approximately NIS 310 million over two months. The current proposed reduction is estimated to cost around NIS 150 million per month.

Ministry professionals are against the cut, citing Israel's less-than-ideal fiscal situation and the potential for higher debt or future tax increases. A statement from the Finance Minister's office indicated that Smotrich instructed his staff to prepare for further fuel subsidies to counter the global energy crisis's impact on consumer prices. He believes the reduction will stimulate economic growth, maintain price stability, and prevent inflation across various sectors.