Netanyahu intervenes to cut fuel excise

PM says state doesn't have to collect on every price rise; 95-octane gas to be NIS 7.74, won't break NIS 8.

March 1, 2012 01:29
2 minute read.
Gas station

Gas station 521. (photo credit: Marc Israel Sellem)


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The maximum price of fullservice 95 octane gasoline will hit a record NIS 7.95 Thursday, even after Prime Minister Binyamin Netanyahu’s last-minute intervention reduced the price increase by 10 agorot.

The Energy and Water Ministry initially set the price at NIS 8.05 – an increase of 38 agorot – on the back of the shekel’s depreciation against the dollar and a spike in global oil prices. It determines the maximum price each month according to five components: the cost of oil; an excise tax (currently NIS 2.96); marketing margins; value-added tax (VAT) on the first three components; plus an added full-service fee (currently NIS 0.21).

Netanyahu’s intervention, which came just minutes before the main evening news broadcasts at 8 p.m., ensured the price did not pass the NIS 8 threshold – seen as a psychological threshold for consumers. His office said in a press release that the Finance Ministry will formulate proposals in the coming months to solve the gasoline issue.

On Wednesday afternoon, MKs helped defeat a proposal by MK Meir Sheetrit (Kadima) to remove the VAT component from the price of gasoline. Netanyahu stepped out of the Knesset during that vote, but returned hours later with his own announcement.

“The government is not prepared to listen to the public,” Sheetrit said during the Knesset’s debate on his bill.

“A gasoline price increase will cause a general price increase, and the lower classes will be the first hit. What the Treasury does not understand is that a fuel crisis will expose the state to inflation, which will cost the economy hundreds of millions of shekels and lead to economic crisis.”

Earlier in the day, Energy and Water Minister Uzi Landau told Army Radio that the price of gasoline was “excessive.”

Pointing out that taxes account for more than 50 percent of the price, he urged his government counterparts to absorb the price increase.

“When global oil prices rise, so too does the cost to the consumer,” Landau said.

“But it is important to remember that for many Israelis a car is not a luxury item, but rather a work tool for all intents and purposes.”

A Kadima spokesman said that the prime minister had bowed to pressure but could not buy the public for 10 agorot. Earlier, Kadima leader Tzipi Livni called the price increase “a pointless scandal,” and said the time had come for the government to put the general good of the public first.

Labor leader Shelly Yacimovich said Netanyahu had deceived the public in an embarrassing manner, “like a salesman whose prices always end with .99.”

She added: “The excessive price of gasoline is a result mainly of double taxation, indirect and unequal, which turns the middle class into a production plant for tax revenues.”

Doron Cohen, the Finance Ministry’s acting director-general, ruled out lowering the VAT or gasoline excise tax on Tuesday, saying that both had already decreased proportionally to the state budget over the past few years.

Speaking at a conference in Tel Aviv, Cohen said the Treasury could not give up on 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.

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