National Infrastructure Minister Binyamin Ben-Eliezer said Sunday that he will present a proposal that would reduce differential tax on gas purchases without hurting state revenue during his meeting this Thursday with Acting Finance Minister Ehud Olmert.
The tax cut would lower the price paid by motorists by 25 agorot per liter of all types of fuel besides diesel, since diesel prices are not regulated, said National Infrastructure Ministry spokeswoman Tami Shenkman.
Because revenues from fuel duties have risen significantly along with the fuel prices themselves, the state can afford to lower those taxes, according to the ministry.
Expanded demand for fuel in China and India, a lack of refining capacity worldwide, hurricanes Katrina and Rita and geopolitical factors have strained the global petroleum supply, amounting to an external tax of roughly NIS 10 million annually on the Israeli economy, explained Amit Mor, CEO of EcoEnergy Consulting.
"In this situation, it is an outrage that the government is riding the wave and increasing its tax revenues through the external rise in fuel prices by expanding its income from VAT," he said.
VAT is taken on the full price of gas after transportation costs, a retailing profit margin, and NIS 2.23 per liter in excise tax have been added to the NIS 2.50 wholesale price per liter. While, in recent years, the excise tax has only risen in line with inflation keeping government income from it stable VAT on the full price of a liter of fuel has risen to NIS 0.88 from NIS 0.58 two years ago, boosting state revenues from it by "hundreds of millions of shekels" in recent years, Mor said.
The total tax on a liter of benzine currently stands at NIS 3.11, accounting for half the price paid by consumers following Saturday night's price hike, Mor stressed.
Mor called on the government to correct the situation by cutting the excise tax by NIS 0.50.
"The public does not need to be punished twice for the global rise of oil prices, and certainly not by its own government," he argued.