Sources inform ''Globes'' that the Israel Tax Authority is preparing a comprehensive reform for personally imported cars, which is expected to make it much more worthwhile. The reform will be submitted to the Tax Authority’s management for approval in a few days, after which it will be submitted to acting Minister of Finance Ehud Olmert for approval. He supports the reform, and is one of the persons urging it.
Sources in the vehicle sector believe that the reform will change the method of calculating the value of personally imported cars for tax purposes, equalizing it to the method for calculating the price of cars imported by car agencies. Import agencies pay taxes on the basis of the price charged by manufacturers, after deducting various commercial discounts.
In contrast, the price of a personally imported car for tax purposes is currently calculated on the basis of the manufacturer’s official price catalogue, published by European manufacturers. Customs allows a gap of up to 10% between the nominal price appearing on the invoice presented by the person importing a car and the manufacturer’s listed catalogue price. Even so, there are still wide gaps between the calculation methods in favor of car import agencies, especially for luxury cars.
As a result, the number of personally imported cars has plummeted in recent years, to only 150 cars in 2004, mostly luxury cars, from 700-800 cars a year a few years ago.
Equalizing the calculations of the value of cars will probably cut taxes on luxury cars by tens of thousands of shekels. These cars cost Israeli consumers over $100,000.
The reform is being prepared partly under pressure by the European Commission over the past year, following a complaint by a European company that delivers cars to Israel. The EU claims that discrimination in calculations methods contravenes the General Agreements on Tariffs and Trade (GATT). The EU has threatened to impose economic sanctions against Israel unless it changes its calculation methods.
Israeli car importers, especially importers of luxury cars, are expected to strongly oppose the proposed reform.
Vehicle sector sources believe that the Tax Authority will announce other measures and restrictions simultaneously with the reform in personal car imports. These measures will prevent the abuse of personal car imports to import imports of cars for commercial purposes. Measures will include control, supervisory and enforcement mechanisms on the sources of cars and on buyers.
A Tax Authority spokesperson confirmed that a reform in personal car imports would be submitted shortly to the Tax Authority management for approval.
Published by Globes [online], Israel business news - www.globes.co.il - on November 7, 2005