Israel's Manufacturers Demand Diesel Tax Cut Amid Soaring Prices

Israeli industrialists are demanding a one-shekel per liter excise tax reduction on diesel fuel, mirroring recent cuts for gasoline, citing a significant price surge for diesel since the start of 2026. The Association of Manufacturers has appealed to Finance Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu to extend tax relief measures to diesel, emphasizing its direct impact on the operational costs of factories, businesses, and commercial transport.

This demand follows a series of gasoline excise tax reductions totaling one shekel per liter over approximately one month, which lowered the price of 95-octane gasoline from 8.27 to 7.77 shekels per liter. The Association highlighted that while private car owners have benefited from these measures, industries reliant on diesel have not received comparable support, despite diesel prices increasing substantially more than gasoline.

Data from the association indicates that between January and October, the pre-tax and VAT price of 95-octane gasoline rose by about 101%, while diesel fuel prices increased by approximately 125% in the same period. The price difference per thousand liters between the two fuels widened from 178 to 769 shekels, more than quadrupling.

Industry representatives propose a diesel excise tax cut of 84.7 agorot per liter before VAT, which would amount to a one-shekel reduction per liter including VAT, matching the total gasoline tax reduction. They argue that if funds are available for further fuel tax cuts, diesel should be prioritized due to its direct impact on industrial and business expenses.

However, the Ministry of Finance opposes the measure, estimating that a one-shekel diesel tax cut would cost the state treasury about 200 million shekels monthly. Concerns also exist regarding the lack of state control over diesel prices, with fears that the tax benefit might not fully reach consumers and could be retained by fuel retailers. The ministry further suggests that such a reduction might stimulate increased fuel consumption without guaranteeing a proportional decrease in the cost of living. Consequently, it remains uncertain whether Smotrich will approve extending the gasoline tax relief to diesel.