Gafni Regrets Gasoline Price Hikes, Moots Suspending Tax Cuts Instead

Popular protest against fuel costs gains speed: Organizers promise escalation next week.

The government should cancel the tax hike on gasoline and compensate itself for the loss of income by suspending tax cuts, urges Knesset Finance Committee chairman Moshe Gafni.

Moshe Gafni
Daniel Bar-On

On January 1, excise tax on gasoline increased by 20 agorot per liter, raising Israeli gasoline prices to record heights.

While he supports the concept of lowering income tax for individuals and corporate tax for businesses, Gafni elaborated, planned tax cuts could be shelved for a year to ease the burden on Israel's drivers. Under no circumstances, though, should relief for Israel's drivers come at the expense of the state budget or government deficit, he added.

It is true that tax cuts spur economic activity, in theory, said the chairman, but the level of direct tax in Israel (income tax and corporate tax ) is among the lowest in the Organization of Economic Cooperation and Development (which Israel joined last year ). The level of indirect tax (VAT and tax on gasoline, for instance ) are among the highest in the OECD. "Therefore, it is possible to suspend the reform of corporate tax and direct tax for a year," Gafni said.

He claims there is broad support in the Knesset for his concept, but the prime minister and Finance Minister Yuval Steinitz insist on adhering to the plan to lower direct taxation.

It must be said that the Knesset Finance Committee, headed by Gafni, approved the Economic Arrangements Bill, which included the increase in excise tax on gasoline. "I beat my breast for supporting the increase in excise tax on gasoline," Gafni said yesterday, saying that people approach him to protest that specific move even in synagogue. "We should have insisted that the excise tax not be raised, and that another source of tax income be found."

However, he waxed cynical about the support of Likud Knesset members for abolishing the increase in excise tax, saying it demonstrated a lack of leadership culture.

Meanwhile, at the urging of Finance Ministry budget director Udi Nissan, Gafni agreed to postpone a Knesset Finance Committee vote on a legislative proposal that would restore supervision over water prices to the committee itself. The bill had been formulated by Gafni and other members of the committee. Nissan, who objects, met with Gafni yesterday, asking that the vote on the bill be postponed. Gafni acceded, agreeing to postpone the vote by a week, during which he expects the Finance Ministry to accept a proposal that would set graded prices of water for the disabled.

Quiet descends over the gas stations

"Somebody decided that water prices should be like cola prices," Gafni said yesterday. "The government should supply water to its people at a reasonable price, like it supplies basic services such as education and health care. The former government abolished parliamentary supervision over water prices, with the result that they increased to levels the public cannot afford." Water prices are currently set by local councils and municipalities.

Moving onto the scene in the field, quiet fell over the gasoline stations yesterday, after mayhem the day before as Israelis rushed to fill up their cars ahead of the anticipated increase.

"In the last two days [of January] we saw a strong increase in sales, before the price hike," said Danny Ben-Ner, CEO of the Ten chain of gas stations. Yesterday the Ten stations were dead. "I don't know if it's a boycott, or if everybody simply filled their cars beforehand," Ben-Ner added.

The price of 95-octane gasoline hit a record height of NIS 7.26 per liter yesterday.

"At every station, people were protesting," Ben-Ner says. "Their complaints target us, the Finance Ministry and the prime minister. They're bitter."

A grass-roots organization headed by irritated citizen Zeev Grauer to protest the price of gasoline declared a one-day boycott yesterday, and vows an escalation of protest next week. "It was a consumer boycott, as a symbolic act, not a move against gasoline stations or their workers," Grauer told TheMarker last night.

The organization heads will be meeting today to discuss their next moves, said Grauer, who in normal life is the marketing manager at a large retail chain. "If the weather isn't stormy next week, we'll provide the storm."

The organization leadership has been joined by lawyers, economists and a financial adviser. "They will help us consolidate a plan to lower excise tax," Grauer said.

Taxi rides about to rise 4%

Getting your fix of political or financial advice from taxi drivers is about to get more expensive: The price of a ride is about to rise by 4%. The only question is when.

The price of train travel has already increased by between 50 agorot and NIS 1.50 per ride. For instance, the trip from Tel Aviv to Rehovot rose to NIS 15.50 from NIS 14.50, while journeying by rail from Haifa to Herzliya increased to NIS 27.50.

Bus prices rose at the start of the week. Routes in the greater Tel Aviv area now cost NIS 6, up from NIS 5.80 in 2010. Jerusalem and Haifa city rides cost NIS 6.40 instead of NIS 6.20, while the cost of a ride in Be'er Sheva is now NIS 4.10, up from NIS 4 last year. A monthly bus pass in Jerusalem and Haifa now costs NIS 252 instead of NIS 244; in the greater Tel Aviv area the cost rose to NIS 222 from NIS 215. (Daniel Schmil )