Government Fills Pockets on Motorists' Empty Tanks
The Finance Ministry surprised motorists Thursday morning with a 10 percent hike in the tax on fuel, raising the price at the pump by 35 agorot (7 cents) a liter. The new price of NIS 5.79 a liter ($5.44 a gallon) is even higher -- another 20 agorot (five cents) per liter -- at full-service stations.
The new price actually is a bargain compared with what is in store for next week – a 10 percent hike in gasoline prices because of soaring prices on the world market for crude oil, which topped $60 a barrel Wednesday.
Finance Minister Yuval Steinitz signed the order approving the hike in taxes Wednesday morning, but notice was not published until 9 p.m., preventing motorists from lining up at gas stations and filling their tanks at the old price.
The government also may have kept the price hike a secret in order to prevent gas stations from reaping a profit by hiking the price before midnight, when the new levy went into effect.
Changes in the price at the pump usually are announced at the end of the month, but doing so this time would have resulted in motorists facing a 16 percent jump in prices all at once. The immediate tax increase will add NIS 1.5 billion ($372 million) to government coffers in the next 18 months as the Finance Ministry tries to reduce a bloating deficit.
However, higher prices also may encourage motorists to drive less and carpool more, causing a reduced demand that would boomerang into less-than-expected tax revenues.
During the run-up of gasoline prices last year, the government enjoyed windfall profits of tens of millions of dollars from the value added tax (VAT), which is collected as a percentage of the total price, similar to the sales tax in the U.S., instead of being a flat tax.
The government has proposed hiking the VAT by one percent, which would cause another jump in energy prices.
In an economic package that has been roundly criticized for adversely affecting lower income sectors, Finance Minister Steinitz also wants to apply the VAT to fresh produce for the first time in history. A large number of Knesset Members, backed by consumers, farmers and merchants, may force the idea off the table.
Applying VAT in public markets would cause complications due to hour-to-hour changes in the prices of fresh fruit and vegetables as well as the difficulty of small stall operators to record the taxes. It also is doubtful that tax authorities can enforce a VAT tax in public markets.