Israeli Industrialists Demand Diesel Tax Cut Amid Rising Fuel Costs

The Association of Industrialists of Israel has called on Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich to reduce the excise tax on diesel fuel by one shekel per liter, including VAT. This demand follows a similar reduction in taxes on gasoline over the past month. Avraham Novogrotsky, president of the association, stated that while the government is easing the burden for private car owners, businesses are not receiving comparable support. He argued that factories and companies are disproportionately affected by rising diesel prices, as it constitutes a significant portion of their production costs.

Industrialists cite data showing that the price of 95-octane gasoline has increased by approximately 101% since the beginning of 2026, from 1536 to 3086 shekels per thousand liters. During the same period, the price of transport diesel fuel rose by about 125%, from 1714 to 3854 shekels per thousand liters. The price difference between the two fuels has widened by 4.3 times, from 178 shekels per thousand liters in January to 769 shekels in October.

The association is requesting a reduction of 84.7 agorot per liter in the excise tax on diesel before VAT, which amounts to one shekel with VAT included. They believe that if budgetary funds are available for further tax relief, they should prioritize diesel before increasing the reduction on gasoline. This appeal was prompted by Smotrich's recent decision to cut the gasoline excise tax by half a shekel per liter, bringing the total reduction over the past month to about one shekel per liter. Following this, the price of 95-octane gasoline at self-service stations dropped from 8.27 to 7.77 shekels this week.

The Ministry of Finance's professional staff, including the budget, tax, and chief economist departments, opposed Smotrich's decision, warning of the budgetary cost and the risk of increasing the deficit. They are even more strongly against a similar measure for diesel. The ministry estimates that a one-shekel reduction in the diesel excise tax would result in a monthly loss of approximately 200 million shekels in state revenue. Furthermore, the ministry argues that excise taxes reflect the costs associated with fuel use, and reducing them could encourage consumption with negative consequences. Unlike gasoline, diesel prices are not state-regulated, meaning a tax cut might not fully translate to lower consumer prices, with fuel companies also benefiting. Therefore, the ministry believes such a measure would not effectively lower the cost of living.