BoI Governor: Replace excise on fuel with congestion tax

As fuel prices soar at gas station pumps, Bank of Israel Governor Prof. Amir Yaron has urged that Israel replace excise on gasoline and other fuels with a congestion tax. On Thursday at midnight April 1, the maximum price of government price controlled 95 octane gasoline at self-service pumps in Israel will rise on by NIS 0.39 to NIS 7.44 per liter, the highest price since 2014 as a result of the Russia-Ukraine war and sanctions on Russia.

Excise on fuel produced NIS 21.5 billion revenues for the government in 2021 and consequently Minister of Finance Avigdor Liberman is reluctant to lower the tax.

Prof. Yaron made his case for the shift to a congestion tax at the presentation ceremony yesterday for the Bank of Israel’s Annual Report for 2021. He told Army Radio (Galei Tzahal) that in the long run, Israel should switch from excise to the congestion fee, which is considered a smarter tax.

Excise makes up half the price on gasoline and the Ministry of Finance has come under pressure recently to lower it by 5% -10% to moderate the rise in the cost of living caused by the jump in oil prices.

Liberman opposed a cut in excise on fuel, in order not to encourage use of cars on Israel’s already congested roads but also it is difficult to raise something again after it has been cut.

But Prof. Yaron suggested that congestion tax was the right tool in order to influence a reduction in congestion on Israel’s roads. He said, “Without taxation, individuals only takes into account the cost in terms of time and fuel consumption, and not that they are creating congestion on the roads. Congestion tax will put the cost on people who choose to travel in their own car during rush hours. “

However, the Bank of Israel does not expect the shift to congestion tax to happen tomorrow due to public opposition and because congestion tax is difficult to implement from a social point of view. But the Bank of Israel believes that when there will be available public transport alternatives that will reduce reliance on cars, then it would be possible to mobilize support for the measure.

Congestion on Israel’s roads is rapidly worsening and is high by international standards. The Bank of Israel also said that congestion tax would put more burden on car owners in central Israel and less burden on drivers in the periphery.

Published by Globes, Israel business news – – on March 30, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

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