Finance Minister Smotrich Seeks Further Fuel Tax Cut Amid Professional Opposition

Israeli Finance Minister Bezalel Smotrich is pushing for an additional reduction in fuel taxes to prevent a record rise in gasoline prices. This move comes just a month after a similar tax cut, which Smotrich approved despite opposition from financial professionals within his ministry and concerns that it was politically motivated ahead of elections. Smotrich met with senior Ministry of Finance officials on Tuesday to discuss the proposed further tax reduction, following an announcement by the Ministry of Energy and Infrastructure that gasoline prices would increase to 8.27 shekels per liter starting Wednesday night.

Smotrich's office stated that the tax cut is "correct at this time to promote growth in the Israeli economy." However, this initiative faces continued opposition from the professional echelon within the Ministry of Finance. In early September, Smotrich signed an order to reduce the gasoline tax by 50 agorot per liter for a period extending two months and past the elections. This prior reduction also encountered professional objections, with ministry officials expressing fears it was part of "election economics."

The government's legal advisor approved the earlier tax cut despite the professional objections. The Ministry of Energy and Infrastructure announced that the maximum price for a liter of 95-octane gasoline, including VAT, would be 8.27 shekels, a rise of 52 agorot from the previous price. The additional cost for full service remains unchanged at 26 agorot per liter.

The Fuel and Gas Administration explained that the new price already accounts for the existing 50 agorot per liter fuel tax reduction, which is valid until the end of October 2026. The price increase is attributed to a nearly 13% rise in global gasoline prices, coupled with increasing oil prices and ongoing concerns about crude supply disruptions and global energy market stability. A roughly 3% increase in the dollar's exchange rate against the shekel also contributed to the higher fuel costs in Israel.

If Smotrich proceeds with the additional tax cut, it will mark the second intervention in two months to curb rising gasoline prices, despite persistent opposition from his ministry's professional staff.