Israel mulls gas tax hike to offset coronavirus costs

The government will need sources of revenue as income from businesses tanks during pandemic.

By Batya Jerenberg, World Israel News

The Treasury is considering raising the gasoline tax at least temporarily as a result of the huge outlay of government funding to support the economy during the current pandemic, Globes reported on Tuesday.

Fuel prices are set to drop drastically next month as the price of crude oil falls to its lowest price in almost 20 years and demand shrinks due to the coronavirus crisis while supply remains high. Instead of dropping the price, the plan is to keep gasoline prices at the same levels with the government pocketing the difference in tax.

The reasoning is to make up for the massive tax shortfall resulting from the decision to shut down much of the country in a bid to slow the rate of infection in the public.

Tax revenues have plummeted as over half a million Israelis have become unemployed and malls and entertainment centers remain closed. With most businesses shuttered or paralyzed, the state is losing billions in taxes from both employers and workers. The Finance Ministry needs to find ways to fund the massive amounts of unemployment benefits, tax relief, and other measures being offered to keep the damage to the economy to a manageable level.

Most of the high price (about $6.50/gallon) Israelis pay at the pump is already due to taxes. The excise duty on a liter of gasoline is currently NIS 3.07 (85 cents), with an additional 17 percent going to value added tax. This brings in an annual NIS 20 billion ($5.5 billion) to government coffers as the number of cars in the country increases from year to year.

The Finance Ministry has denied that it is considering such a move, saying, “There is no discussion on this matter.”

It may yet prove too tempting a way for the government to make back even a small part of its 2020 losses. The process is also easy as it does not require legislation, but rather a signed order from the finance minister.

The government shut down most public transportation Monday evening in a bid to slow the spread of the coronavirus.

Israelis have been ordered to stay at home and only go out for food and medicine for at least the next week, so in the short term few Israelis will be gassing up their vehicles, no matter what the price.