Israel Considers Further Fuel Tax Cut Amid Price Hikes

Israeli Finance Minister Bezalel Smotrich has instructed his ministry's professionals to prepare an additional reduction in excise tax on gasoline, following a price increase that took effect in early October. This proposed cut of 50 agorot (half a shekel) would lower the maximum price for a liter of 95-octane self-service gasoline from 8.27 shekels to 7.77 shekels. The details of this measure are still being finalized, and the reduced price is contingent on the completion of the process and the implementation of a new order.

For drivers, such a reduction would translate to savings of approximately 25 shekels for a 50-liter fill-up. Currently, this amount costs 413.50 shekels, but would drop to 388.50 shekels if the price is lowered. Monthly savings for a driver using 100 liters would be 50 shekels, and a family with two cars consuming 200 liters would save 100 shekels, depending on the amount of fuel purchased while the reduction is in effect.

The previous price hike of 52 agorot at the start of October raised the maximum self-service price from 7.75 to 8.27 shekels per liter, including VAT. The additional charge for full service remained 26 agorot per liter, bringing the maximum price with a service attendant to 8.53 shekels. The current proposed reduction would be in addition to a cut already implemented in September, which had lowered the price from 8.25 shekels to 7.75 shekels.

This existing reduction is valid until the end of October and is already factored into the current price of 8.27 shekels. The recent increase occurred while the tax benefit was still active, attributed to rising global gasoline prices and a strengthening dollar. The benchmark gasoline price increased by about 13%, while the dollar appreciated by approximately 3%, impacting the shekel price due to gasoline being priced in dollars.

If the additional 50 agorot reduction is enacted, it would nearly offset the October price increase, leaving the price just two agorot higher than the post-September reduction level. For the state, this tax cut represents a loss of tax revenue. The cost of the existing reduction was estimated at around 310 million shekels for September and October. An additional 50 agorot cut for a month is projected to reduce revenues by another 150 million shekels, bringing the total estimated cost to approximately 460 million shekels for the period of the benefits.

Ministry of Finance professionals reportedly oppose further reductions due to the state budget's condition and anticipated revenue decline. The move is also occurring close to the October 27th elections. The previous reduction received legal approval during an election period, but this does not confirm approval or implementation for the new cut. The state is still collecting the reduced tax on gasoline from the September reduction, yet global price increases and the dollar's strength pushed pump prices back up to 8.27 shekels.