Manufacturers Demand Diesel Excise Cut Following Gasoline Tax Relief
Following gasoline excise cuts, the Manufacturers Association of Israel demands that Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich extend the tax relief to diesel fuel.
Days after reducing the excise duty on gasoline, the Manufacturers Association of Israel is demanding that Finance Minister Bezalel Smotrich and Prime Minister Benjamin Netanyahu extend the reduction to diesel fuel as well. The association argues that diesel prices have risen even more sharply than gasoline since the beginning of the year, serving as a vital production input for industry and the business sector.
The demand follows Smotrich's decision to cut the gasoline excise by an additional 0.50 NIS per liter, bringing the total cumulative reduction over the past month to 1 NIS per liter. This move was enacted despite opposition from professional officials in the Ministry of Finance, including the Budget Department, the Tax Authority, and the Chief Economist's Division, who warned against interfering with prices through tax cuts due to budgetary costs and widening deficits.
Following the latest reduction, the price of 95-octane gasoline at self-service stations dropped this week from 8.27 NIS to 7.77 NIS per liter. Manufacturers Association President Avraham Novogrotsky wrote to Netanyahu and Smotrich, stating that while the state is easing the burden on private vehicle drivers, it is failing to provide corresponding relief to factories and businesses hit even harder by diesel price hikes.
According to association data, based on refinery gate prices excluding excise and VAT, the price of 95-octane gasoline surged by approximately 101% between January and October 2026, rising from 1,536 NIS to 3,086 NIS per thousand liters. Over the same period, transportation diesel prices skyrocketed by about 125%, jumping from 1,714 NIS to 3,854 NIS per thousand liters. The refinery gate price gap widened from 178 NIS per thousand liters in January to 769 NIS in October—a 4.3-fold increase.
Industrial Demands and Ministry Response
The manufacturers are demanding a reduction of the diesel excise by 0.847 NIS per liter before VAT, equivalent to 1 NIS per liter including VAT, mirroring the cumulative gasoline tax cut. They argue that if budgetary resources exist for further excise reductions, they should have been directed toward diesel first.
However, the Ministry of Finance estimates that cutting the diesel excise by 1 NIS would cost state coffers approximately 200 million NIS per month in lost revenues. Officials explained that professional opposition stems from the fact that excise reflects environmental and usage costs, and reducing it incentivizes harmful consumption. Unlike gasoline, diesel is not subject to government price controls, reinforcing the Treasury's resistance.
"The reduction of the excise duty will not be fully passed on to the final consumer and will instead be split between consumers and fuel marketing companies, failing to genuinely lower the cost of living," the Ministry of Finance stated.
