JIMS: Israel's car purchase tax among world's highest

The Jerusalem Institute of Market Studies found that the tax rate on new cars is five times the level in most European countries.

The Israeli government is the main reason for Israel's high car prices, states the Jerusalem Institute of Market Studies (JIMS), which says that Israel's purchase tax is among the highest in the world, resulting in the need for 12 monthly salaries to buy an average car.

JIMS researcher Keren Harel-Hariri says, "Israel's purchase tax is one of the highest in the world - 83% plus VAT. The tax on spare parts and customers is effectively over 100%." She adds that the discounts given to leasing companies and car fleets, compared with ordinary citizens, further distorts pricing, because the Ministry of Finance favors companies with big car fleets.

Harel-Hariri adds that the green taxes, instituted in 2010, benefit only 1.24% of all car buyers, while taxes actually rose for most cars - once again benefiting the few at the expense of the many.

"The government once promised to cut the purchase tax to 75% and then to 72%, but the 2010 green tax reform raised the purchase tax to 83%, while granting a tax break on the basis of emissions. In effect, only non-polluting cars receive the 30% tax rate, while most Israelis pay higher taxes on their cars."

Harel-Hariri says that the tax rate on cars in Israel is five times the level in most European countries. Several countries, including France, Italy, Germany, and Luxembourg only collect VAT on cars and spare parts.

Commercial car imports face double taxation: customs, purchase tax, and VAT. Harel-Hariri cites Ministry of Finance figures that taxes on cars amount to 113-128%, resulting in a lower proportion of cars in Israel than in Europe: 325 cars per 1,000 people, compared with 500 cars per 1,000 people in the EU.

As in other sectors of the Israeli economy, the motor vehicle sector suffers from a lack of competition. Harel-Hariri says, "There are only 20 companies registered with the Association of Motor Vehicle Importers. 7-9 companies account for most motor vehicle imports, and the top four importers account for half of all car deliveries."

Published by Globes [online], Israel business news - www.globes-online.com - on August 16, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

5 Comments
View comments in rows
Update by email about comments talkback
POST
Comments
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018