Minister of Finance Yuval Steinitz has decided to grant tax breaks on hybrid and electric cars as part of the Israel Tax Authority's policy to encourage the use of environmentally friendly cars through green taxes. The new tax breaks will come into effect on June 1, and will cost the Treasury an estimated NIS 130 million.
The purchase tax on electric cars will be cut from 10% to 8% of the purchase price in 2012-13, when electric cars will enter the market. The purchase tax on hybrid cars will be kept at 30% in 2013, instead of being raised to 45%.
Steinitz also issued a directive setting a special purchase tax for plug-in hybrid cars of 20% through the end of 2013. The tax will gradually rise to 30% in 2014, the same level as the current purchase tax on hybrid cars, and then it will be raised to 45% in 2015, 60% in 2016, and the full rate beginning in 2017.
The Ministry of Finance says that the decision to provide tax breaks for hybrid and electric cars is because they reduce to the point of eliminating polluting emissions from cars, thereby improving public health. Ministry figures show that use of hybrid cars haves air pollution compared with gasoline powered cars. Beginning in 2016, the use of electric cars will halve air pollution compared with gasoline powered cars, because most electricity will be produced by natural gas.
Car industry sources said in response that the tax breaks still discriminate in favor electric cars over other technologies, and that the tax cut on plug-in cars is merely symbolic, temporary, and inadequate.
The tax breaks will have only a negligible effect on the price of the Renault Fluence ZE electric car that Better Place LLC will offer, and will slightly lower the use value of the car for company fleets. Most of the tax break will come into effect in 2014, when the electric car will enjoy much better tax breaks than originally planned.
The Ministry of Finance reiterated its original condition that the tax break will be subject to the market share of electric cards. Industry sources say that the new plan was adjusted for delays in Better Place's timetable.
Published by Globes [online], Israel business news - www.globes-online.com - on April 29, 2012
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