"We must close the deficit created with new taxes," Ministry of Finance director general Haim Shani told the Knesset State Control Committee, during a special meeting today to discuss the increase in excise by NIS 0.26 per liter, which is largely responsible for the rise in the price of gasoline to an all-time high of NIS 7.14 per liter.
Shani said, "We built for the government a proposal for the state budget. We defined three key factors for the budget: dealing with Israel's competitiveness, dealing with the labor market, and dealing with internal growth engines. Regulations and legislation were set out to promote each of these items."
Shani outlined the budget deficit considerations facing the Ministry of Finance and the importance of meeting the deficit targets, which was why the ministry decided to raise indirect taxes, including the excise on fuel.
Shani said that the increase in the fuel excise also had an "environmental value", by driving Israelis to use public transport instead of their cars. He declined to mention the decrepit state and shortfalls in Israeli public transport.
Shani said that the increase in the excise and other tax hikes were intended to meet the deficit target, and cited the debt crises in Europe. "No one will help us. We took the alternatives of every possible tax. Obviously, it is possible to cut pensions or other things. There is a wide range of possible subjects."
As gasoline prices reach an all-time high, and Israel's middle class is feeling the pinch, it appears that the Knesset is beginning to sense the people's fury. However, while the State Control Committee is holding a special meeting on the increase in fuel prices, no actual decision is likely.
Since Prime Minister Benjamin Netanyahu took up office in 2009, the excise on gasoline has been raised by NIS 0.50 per liter; 56% of the cost of gasoline is the excise, which means that most of the money consumers pay goes to the government.
State Committee chairman MK Yoel Hasson (Kadima) said, "On one hand, I hear that the reason for raising gasoline prices is environmental, in other words to encourage the use of public transport. But the government also raised public transport fares, so I conclude that this government wants to take billions of shekels from the public." He claimed that the price of gasoline in Israel was one of the highest in the world.
Israel Tax Authority director general Yehuda Nasradishi said that the excise hike was due to the rise in the price of fuels in the world. He said that the price of fuel in Israel was average in the OECD. Tax Authority deputy director general economics Eran Yaakobi said that excise hike would undoubtedly lead to a drop in demand, because people would travel less. He added, "The excise was not changed in a decade, except for the NIS 0.30 per liter hike in May 2009, and the additional hike now."
MK Robert Tiviaev (Kadima) said that there was no relationship between the price hike and a reduction in the use of cars. MK Rachel Adatto (Kadima) added, "It is cynical for the Ministry of Finance to claim that the excise hike will reduce air pollution, when suburban railroads are shut down will cause more traffic jams and increased the use of private cars."
Published by Globes [online], Israel business news - www.globes-online.com - on January 4, 2011
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