MKs nix tax hike – and cut

Bowing to public pressure, Knesset tells Finance Ministry to cancel NIS 0.40 per liter fuel increase; also cancels income tax cut.

Gas prices (photo credit: Marc Israel Sellem/The Jerusalem Post)
Gas prices
(photo credit: Marc Israel Sellem/The Jerusalem Post)
The Knesset Finance Committee on Monday instructed the Finance Ministry to cancel the NIS 0.40 per liter hike in the fuel excise that was supposed to go into effect at the beginning of 2012, bowing to public pressure over rising gasoline prices.
However, the committee also canceled an income tax cut that was part of the state budget for 2011-12, and which was supposed to bring the basic tax rate down from 24 percent to 23%.
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The first move followed growing calls from interest groups and in the media for the government to cancel the excise, as the price of self-service 95 octane gasoline blew out to NIS 7.62 with the most recent price hike on April 30.
Committee chairman Moshe Gafni said Israel ranked low compared to other countries in direct taxes, but collected much more than other in indirect taxes.
“From a pure economic perspective there is logic in this, but from a social perspective it is a disaster,” he said. “The Israeli economy is strong and stable enough, and therefore there is space to change the policy slightly, so that citizens do not suffer following the raising of indirect taxes on consumer products such as the fuel excise.”
According to data sent to Gafni before the meeting by Israeli Consumer Council CEO Ehud Peleg, consumers today pay around NIS 320 million more on fuel each month than in the past few years.