Gasoline prices expected to hit record high

On back of sharp rise in global oil prices amid tensions over Iran, gasoline prices set to reach NIS 7.99 per liter.

By NADAV SHEMER
February 29, 2012 01:37
3 minute read.
Gasoline prices [illustrative photo]

Gasoline prices gas tax 311. (photo credit: Marc Israel Sellem)

The price of gasoline is expected to hit a record high of around NIS 7.99 per liter at midnight on Thursday, on the back of a sharp rise in global oil prices amid tensions over Iran.

Politicians, business leaders and consumer groups all weighed in on the debate Tuesday on how to reduce prices, ahead of the Energy and Water Ministry’s announcement of the maximum price gasoline stations will be allowed to charge in March.

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Finance Ministry acting director-general Doron Cohen ruled out lowering the gasoline excise or valueadded tax, saying that both had already decreased in proportion to the state budget over the past few years.

Speaking at business daily Calcalist’s inaugural Green Growth Conference, Cohen said the Treasury could not give up much-needed taxation revenues. It would be unacceptable to cut the budgets of other government departments in order to reduce the price of gasoline, he added.

The price of fuel at gas stations is determined by five components: the cost of oil; the excise tax, which currently stands at NIS 2.96 per liter; marketing margins; 16 percent VAT on the three aforementioned components; and an added flat fee for full service that now stands at NIS 0.21 per liter. For February, the maximum price of 95 Octane Unleaded is NIS 7.67.

MK Meir Sheetrit (Kadima) announced on Tuesday that he would put forward a bill to remove the VAT on gasoline, and estimated that this would reduce the overall price by around 50 agorot per liter.

“It cannot be the case that a civilized country collects one indirect tax on top of another,” Sheetrit said in reference to the excise and VAT.

“Today, taxes contribute around half of the price of gasoline. If the government is interested in collecting taxes from consumers; it should do so in a transparent manner and be prepared to face the public criticism.”

Sheetrit said he agreed to a request from MKs in December not to put forward the bill, in order to give them time to discuss the issue. But on Tuesday he said that no progress had been made, and that he would now advance the bill again, to embarrass the coalition.

Uriel Lynn, president of Federation of Israeli Chambers of Commerce, urged the Treasury not to reduce the VAT on gasoline, arguing that if it did so it would be forced to raise other taxes to compensate for lost revenues.

“Value-added tax has proved over many years that it is the most effective form of taxation, and turning it into a differential tax will destroy its foundations,” Lynn said. He added that he rejected applying different rates of VAT to specific products when he was the Treasury’s director of state revenues in the early 1980s.

The fairest way to prevent an increase in gasoline prices, according to Lynn, would be to lower the excise to offset the extra VAT revenues that will be obtained as a result of higher oil prices. That way, the Treasury would collect the same amount of revenues as before, and avoid public criticism, he said.

Yossi Arieh, CEO of the Association of Gasoline Corporations and the Israel Energy Institute, was quoted by Ma’ariv as saying that the onus was on the government to reduce taxes.

“We cut our marketing margins by 25%, but the taxes have gradually risen, and today gasoline and VAT constitute 54% of the price of gasoline. The problem is that the state emerges as the main beneficiary from the price increase, while the market does not profit simultaneously,” Arieh said.

The government ordered agencies to reduce marketing margins by 12 agorot last September.

Gasoline stations were allowed to charge a marketing margin of up to NIS 0.59 in February, or 7.9% of the overall cost of the product.

An anti-government consumer campaign was also gaining steam on Tuesday night.

“Stop the gasoline price increase,” a group with more than 16,000 members, called on all citizens to turn on every electrical appliance in their home at the same time on Thursday, with the aim of causing the national electricity grid to collapse.


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