The Ministry of Finance will implement the green taxes update on cars at the end of April. The update tightens the "green score" formula for emissions by new cars, slashing the tax break for clean cars, which currently can amount to as much as NIS 15,000. The ministry expects the update to generate at least NIS 400 million in tax revenues.
The update will mainly affect inexpensive popular cars, ranging from compacts to sedans, for which the tax break is an important part of the importers' calculation of the retail price. In contrast, large and polluting cars, such as SUVs and luxury models, will be unaffected by the upgrade, as they barely benefited from the tax break, if they benefited at all.
The update will also raise the use value on popular models of leased cars used by companies, because the Ministry of Finance calculates the use value as a percentage of a car's list price. Industry sources believe that the ministry is now trying to figure out how to sugarcoat this increase, which will mainly hit the middle class.
More tax hikes coming
Vehicle industry sources say that the higher prices are inevitable for many cars, especially cheaper models, because the conditions in Europe have caused manufacturers to raise prices for importers. This increase will be largely offset, however, because of the shekel's appreciation against leading currencies.
Most importers have not lowered their price lists, despite the strengthening of the shekel against the dollar, euro, and yen, preferring to transfer the extra profits to leasing companies in the form of discounts. Some importers are waiting for the tax update to assess its effect.
Ministry of Finance sources say that the previous government twice approved the green tax update, which was supposed to come into effect on January 1, but was postponed because of the elections and objections by former Minister of Environmental Protection Gilad Erdan. The sources added that green taxes update will probably not be the last tax hike, and that the maximum purchase tax on cars will gradually be raised from the current 81% to 85%.
The Israel Tax Authority declined to comment on the report.
Published by Globes [online], Israel business news - www.globes-online.com - on April 4, 2013
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