Israeli Finance Minister Proposes Fuel Tax Cut Amid Election Season

Israeli Finance Minister Bezalel Smotrich announced on Tuesday, September 29, that he has instructed ministry officials to prepare a plan for additional fuel subsidies to curb rising consumer prices, exacerbated by the global energy crisis. The announcement comes less than a month before elections and shortly after gasoline prices in Israel reached a historic high of 8.27 shekels per liter, effective October 1.

Smotrich's proposal aims to reduce the fuel tax by 1 shekel per liter by the end of October. Currently, the tax is partially reduced, offering consumers a saving of 0.50 shekels per liter. The estimated cost of the further tax reduction is nearly 500 million shekels in lost state revenue.

However, the initiative faces internal opposition within the Finance Ministry. Some specialists argue that the measure is financially unfeasible and lacks funding sources. "This is an expensive decision that is impossible to implement from the state budget perspective," a senior Finance Ministry official told Ynet, adding, "Furthermore, they propose cutting taxes right before the elections. I refuse to support this decision."

Another source within the ministry suggested the price reduction could be seen as voter bribery, casting doubt on its approval by the Ministry of Justice. The ministry's legal advisor previously approved a fuel tax reduction, but the timing of Smotrich's current proposal, so close to the elections, could lead it to be classified as "election economics" and blocked.

This move follows a similar tax reduction implemented before the 2022 elections by then-Finance Minister Avigdor Lieberman, which lowered fuel prices by 1 shekel per liter but expired in December 2022. The upcoming price hike will push the cost of 95-octane gasoline to a new record high, surpassing the previous record set in September 2012.