The Israeli Minister of Finance, Bezalel Smotrich, took significant steps on Thursday evening to alleviate the financial burden on the citizens of Israel by signing orders aimed at reducing the excise tax and purchase tax imposed on gasoline. This decision comes at a crucial juncture as the price of fuel is set to remain unchanged in October, holding steady at 6.94 NIS per liter of 95 octane gasoline. Remarkably, this price stability is a welcome relief, given the relentless surge in global fuel prices that have, of late, made it increasingly challenging for the Israeli government to maintain reasonable prices, shielding the public from over-inflated rates.
This commitment to controlling fuel costs traces its origins back to April 2022 when, confronted with soaring fuel prices, the government implemented temporary provisions aimed at mitigating the financial strain on the populace. These provisions, which have been consistently in effect since then, entail reductions in both the purchase tax and the excise tax applied to gasoline. The regulations currently in force translate to a one-shekel reduction in the consumer price per liter of gasoline when compared to prices without these tax reductions.
ABC POLL: 87% of Americans have a negative view of energy prices as gas prices and utility bills continue to soar under Biden pic.twitter.com/UmuUF7h5JX
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It's worth noting that this reduction was initially slated to end at the conclusion of September, resulting in a mere 13-Shekel reduction in the consumer price per liter of gasoline. However, recognizing the potential for an adverse spike in gasoline prices, the newly signed orders for October 2023 specify a tax reduction amounting to approximately 99 cents per liter, significantly easing the financial burden for consumers. This tax reduction is set to expire at the stroke of midnight between October 31st and November 1st.
To fund this tax reduction for October 2023, the Finance Ministry has opted to cancel the 13-shekel reduction that was originally intended to persist until the end of the year, making way for budgetary reallocations later in November and December 2023. The Ministry of Finance is diligently working to secure alternative budgetary sources by year-end.
In the wake of these developments, Finance Minister Bezalel Smotrich expressed his "commitment to the fight against inflation and the high cost of living", asserting that it remains the government's top priority. He stressed that "preventing price hikes attributable to inflation is a prudent and necessary step in this ongoing battle." The minister assured that the government will continue to serve the interests of all Israeli citizens while advancing the country's economy with responsibility and professionalism.
As the world grapples with rising gasoline prices and the shekel's relative weakness against the dollar, Minister Smotrich faces tough choices ahead. He may have to consider increasing the budget deficit to sustain the government's price control policies.
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Hard to fathom how Europe's leadership thought it could win an economic war with… pic.twitter.com/2k4PAH7dCd
However, it's important to recognize that these measures will come at a cost. The excise tax reduction in October is expected to result in a revenue loss of approximately 200 million NIS to the state coffers. This figure adds to the 3 billion NIS that the state has already foregone since the inception of fuel tax reductions in April of last year.
