Manufacturers Urge Finance Minister to Cut Diesel Tax After Gasoline Reduction

Days after a reduction in the excise tax on gasoline, the Manufacturers Association of Israel is urging Finance Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu to extend this tax cut to diesel fuel. The association argues that diesel's price increase since the beginning of the year has been steeper than gasoline's, and that diesel is a crucial production input for industry and businesses.

This demand follows Smotrich's recent decision to cut the gasoline excise tax by half a shekel per liter, accumulating to a one-shekel per liter reduction over the past month. This move was made despite opposition from professional officials within the Finance Ministry, including the Budget Department, Tax Authority, and the Chief Economist's office, who warned of the budgetary cost and the risk of increasing the deficit.

Following the latest reduction, the price of 95-octane gasoline at self-service stations dropped this week from 8.27 shekels to 7.77 shekels per liter. Avraham (Novo) Novogrotsky, president of the Manufacturers Association, wrote to Netanyahu and Smotrich, stating that while the government is easing the burden on private car owners, it is not providing equivalent relief to factories and businesses that have been more severely impacted by rising diesel prices.

According to the association's data, from the start of 2026 until October, the price of 95-octane gasoline at refinery gates (excluding excise and VAT) rose by approximately 101%, from 1,536 shekels to 3,086 shekels per thousand liters. During the same period, the price of transport diesel surged by about 125%, from 1,714 shekels to 3,854 shekels per thousand liters. The gap between their refinery gate prices widened from 178 shekels to 769 shekels per thousand liters, a more than fourfold increase.

The manufacturers are requesting a reduction of 84.7 agorot per liter (before VAT) on diesel excise tax, which amounts to one shekel per liter including VAT, mirroring the cumulative reduction for gasoline. They contend that if there are budgetary funds available for further excise tax reductions, they should be directed to diesel first, and then to gasoline.

However, the Finance Ministry appears unconvinced. Estimates suggest that a one-shekel per liter reduction in the diesel excise tax would result in a monthly revenue loss of approximately 200 million shekels for the state. Ministry officials explained that their professional opposition stems from the fact that excise taxes reflect the costs associated with fuel usage, and reducing them incentivizes such usage, which has harmful consequences. Unlike gasoline, diesel is not a government-regulated product, making the professional opposition to its tax reduction even stronger. The ministry also stated that a reduction in the excise tax would not be fully passed on to the end consumer but would be shared between consumers and fuel marketing companies, thus not significantly lowering the cost of living.