Israel Fuel Tax Cut: Half-Shekel Reduction Per Liter

Israel's Finance Ministry published a draft order Thursday to reduce the excise tax on gasoline by 1/2 shekel (approximately 14 cents) per liter, opening it for public comment before implementation.

The move follows approval from Attorney General Gali Baharav-Miara for the measure championed by Finance Minister Bezalel Smotrich, despite objections from senior professional staff within the Finance Ministry. According to the announcement, Smotrich is expected to sign the reduction order on Sunday, after the public comment period closes and any feedback is reviewed. The new pricing will take effect immediately upon the minister's signature, with gas stations updating their prices at midnight between Sunday and Monday.

The Finance Ministry's legal advisor, Dudi Kopel, submitted an opinion to the Attorney General's office acknowledging that the excise tax reduction contradicts the position of the ministry's professional echelon. However, he clarified that given similar steps were taken in Israel and other countries in 2022, and considering the need to ease the cost of living burden, there is no legal barrier to approving the measure.

The initiative aims to cushion the expected increase in consumer gasoline prices. The half-shekel reduction per liter carries an estimated budgetary cost of approximately 300 million shekels (roughly $82 million) per month in lost government revenue. The cut comes against the backdrop of recent fuel price increases, with a liter of 95-octane gasoline in self-service currently standing at 8.25 shekels.

Once the reduction takes effect, the expected price for a liter of 95-octane gasoline at self-service pumps will drop to approximately 7.75 shekels, a significant decrease from current levels. Smotrich's office stated that the minister ordered the excise tax reduction to prevent anticipated price increases at the pump.

Earlier this month, the Fuel and Gas Administration at the Ministry of Energy and Infrastructure updated fuel prices, raising the maximum price for 95-octane gasoline by 16 agorot compared to the previous month. That increase resulted from a combination of factors, including a roughly 6% rise in international gasoline prices and a periodic adjustment to the excise tax component.