Fuel Tax Reduction: Israel Plans Half-Shekel Price Cut

The legal adviser to Israel's Finance Ministry, Dudi Kopel, has submitted an opinion to Attorney General Gali Baharav-Miara recommending approval of Finance Minister Bezalel Smotrich's initiative to reduce fuel prices. The recommendation comes despite strong opposition from the ministry's professional staff and concerns that the move constitutes election-year economics.

According to details first published Wednesday by Kan News, Kopel wrote in his opinion that while the plan to reduce the excise tax on fuel by approximately half a shekel per liter contradicts the position of the Finance Ministry's professional echelon, there is no legal barrier to approving it. He noted that a similar measure was implemented in Israel and other countries in 2022, and given the need to ease the cost of living burden, the reduction can proceed legally.

The Finance Minister's initiative aims to soften the expected increase in gasoline prices for consumers. The plan under consideration involves a reduction of approximately half a shekel per liter, a step estimated to cost the state treasury about 300 million shekels per month. The reduction would come against the backdrop of recent fuel price increases, with a liter of 95-octane gasoline in self-service currently standing at 8.25 shekels (approximately $2.25).

The Finance Minister's office confirmed the details, stating that Smotrich "has instructed officials to advance a reduction in the excise tax on fuel, in order to prevent the expected price increases resulting from the global energy crisis and ongoing tensions with Iran." The office added that "professional discussions are currently underway at the Treasury to formulate the exact level of reduction and the precise mechanism. The Finance Minister intends to sign the order as soon as possible so that the reduction can take effect in the coming days."

Professional staff at the Finance Ministry are expressing firm opposition to the measure. According to their estimates, every 10-agorot (cent) reduction in the price per liter translates to a loss of approximately 30 million shekels in monthly revenue. In addition, the legal feasibility of approving such a step during an election period is being examined with the Attorney General, with the primary concern being that it constitutes election-year economic policy.

The initiative comes following an announcement by the Energy and Infrastructure Ministry of an increase in the maximum price of 95-octane gasoline in self-service by 16 agorot to 8.25 shekels per liter. The increase resulted from a combination of factors: international gasoline prices rose by approximately 6%, and the Tax Authority updated the excise component according to the consumer price index as part of a periodic adjustment.