All roads lead to a congestion charge

Traffic on Ayalon Highway

The Ministry of Finance plans to use existing transport schemes as infrastructure for collecting a congestion charge.

In November, the Ministry of Transport relaunched the Derech Erech (Value Road) plan enabling drivers to receive up to NIS 4,500 for driving at off-peak hours. The plan was launched after the Nativ Plus plan for opening public transportation lanes to cars with multiple passengers, introduced by Minister of Transport Bezalel Smotrich, aroused a public tumult and criticism for punishing drivers instead of providing them with good public transportation infrastructure.

Following the criticism, the relevant government ministries again shelved the Ministry of Finance's plan for levying a congestion charge that was about to be aired again. "Globes" has discovered, however, that the Ministry of Finance has merely shifted gears in order to avoid renewed controversy about transportation and road congestion. Ministry of Finance sources say that the congestion charge plan is alive and well on the agenda, awaiting the formation of a new government. Smotrich also understands that implementing the plan is worth of thorough consideration.

Furthermore, the Derech Erech plan put into effect last month is not only compatible with a congestion charge, but can serve as a trial for it.

Derech Erech is planned to cover only 15,000 drivers in 2020, with expansion to 100,000 drivers to follow. It was never planned on a scale that could solve traffic congestion. The plan, if expanded, will create an extensive database of Israelis' driving patterns and of the devices placed in the vehicles, information that can be used in the future to collect congestion charges from the drivers. These tools are also designed to serve as the technological basis for collecting money from those entering the Tel Aviv area in a private vehicle.

"The public has to realize that we can't wait an entire decade before starting to see solutions," says Michal Gelbart, CEO of Future Mobility IL, which is promoting expansion of transportation access, while reducing congestion and air pollution. "The roads are already overloaded now, and the situation is getting worse by the day. We're already in a crisis, and the way out of it requires a range of solutions. Congestion taxes are needed now, and should be implemented immediately. They won't replace other necessary solutions, such as substantial improvement of public transport and expanding bicycle paths infrastructure; they will supplement those solutions.

"Congestion taxes first of all benefit the economically disadvantaged, who are currently unable to reach the metropolitan center, because it requires the high cost of buying and running a private vehicle," Gelbart argues. "The taxes encourage use of public transport by all population groups, thereby breaking the circle in which public transport is regarded as inferior. Congestion taxes are successful wherever they exist; this is indisputable. They don't have to be new taxes, either - they can replace other inefficient taxes, such as the annual vehicle license charge, so that the burden on the public does not increase."

When the option of congestion charges is raised, there is a tendency among many people to say that this is the Ministry of Finance's way of filling its coffers at the expense of drivers, and that it's just another measure that is easy to impose on the public. It turns out, however, that state revenue from congestion charges is unlikely to be especially high, and depends on setting the average price for a trip, while the economic benefit from easing traffic jams is substantial.

If the congestion charge is NIS 10 per trip at peak hours, then assuming 500,000 trips a day, revenue will total NIS 1.5 billion a year. The Bank of Israel estimates the additional transport budget required at 2% of GDP, i.e. NIS 25 billion a year.

Since the revenue from a congestion charge is not significant for the state treasury, the question arises of what to do with the money. A number of options are on the table. One is adding the amount to the budget base, which is likely to cause public outrage, because it will turn the congestion charge into another useless tax that does not create a real solution to the problem it concerns.

Another possibility is financing the metro project - a long-term project that will generate no immediate results, and will not improve public transport for drivers giving up their private vehicles.

A third option is immediate investment in public transport. The current system requires immediate upgrading in order to motivate the public to prefer it to their cars, and this requires more money. In the discussions on the state budget, the Ministry of Transport is demanding a NIS 1 billion supplement for operation of public transport, but has been turned down.

A fourth option is changing the taxation system. Today, someone entering the Tel Aviv area in a car pays the same tax as someone living in Dimona, who is not responsible for transport congestion and the damage that it causes to the economy. A congestion charge will make it possible to lower license charges and other vehicle taxes, for example. This is also apparently the option favored by the minister of transport, who is currently working together with the Ministry of Finance on a transport tax reform.

Published by Globes, Israel business news - en.globes.co.il - on December 9, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Traffic on Ayalon Highway
Traffic on Ayalon Highway
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