Netanyahu Lowers Israel's Gas Tax to Combat Surging Prices

Decision to lower tax on gasoline by 10 agorot comes in the wake of public outrage over the increase in gasoline prices to yet another all-time high.

Prime Minister Benjamin Netanyahu lowered the tax on gasoline by 10 agorot on Wednesday, bringing the price down to NIS 7.74 per liter.

According to Netanyahu, Israel does not “control world gas prices,” This is the third time in the last year that Netanyahu has ordered the lowering of gasoline taxes.

gas - Tomer Appelbaum - February 11 2011
Tomer Appelbaum

Netanyahu’s decision came as a response to public outrage over the increase in gasoline prices to yet another all-time high. Gasoline prices have been one of the many triggers behind public protests over the cost of living during the past year.
Netanyahu originally ordered the finance and energy ministers to intervene in order to lower prices, but was convinced by the Finance Ministry not to intervene in the tax rate on gas.

Starting March 1, Thursday, a liter of 95-octane self-service gasoline will cost about NIS 7.84, a 5.09% increase of 38 agorot, due to rising oil prices around the world. (That is the maximum price. There is nothing stopping gas stations from selling gasoline for less.)

Representatives of the Prime Minister's Bureau, the Energy and Water Ministry and the Finance Ministry met Tuesday afternoon to discuss Netanyahu's directive and to find a way to implement it, such as by immediately cutting taxes. The snag is that the Finance Ministry firmly objects to any such tax cuts.

As a result, the official announcement of next month's gasoline prices was delayed. The announcement should have been made yesterday afternoon.

Netanyahu took similar steps back in August, when gasoline prices were on pace to jump 31 agorot per liter amid mass cost-of-living protests. He ordered the treasury to cut gasoline excise tax by 31 agorot to offset the price increase. The tax was later restored.

Gasoline prices have increased by about 65 agorot per liter this year, which works out to 9%. Due to the higher prices, the state reaped an extra NIS 50 million in taxes. The pump price includes an excise tax of NIS 2.96 per liter, plus VAT of 16%, which works out to NIS 1.07 at current gas prices. In total, 53% of the pump price is tax.

Read this article in Hebrew