BoI: Tax cars more or face total transport failure

Ayalon Highway  photo: Eyal Izhar

A new Bank of Israel study calls for a travel tax on private vehicles and better public transport in Israel.

The State of Israel needs to revise its policy on vehicle purchasing and use in order to avoid total transport failure, the Bank of Israel says in a new research document by Dr. Yoav Friedman of the bank's Research Department.

The study recommends the state to adopt a policy that combines incentives to curb the growth in travel by private car with investment in roads in line with the rate of increase in demand. Measures recommended for reducing private car use include investment in improving public transport and higher taxation of travel in private vehicles. i.e., a "travel tax".

The study, which examined vehicle use and costs in the past two decades, finds that "the price of travel by private vehicle fell sharply in the past decade as a result of a reduction in the real rate of purchase tax (through 'green taxation') and of a rise in variable vehicle expenses (mainly fuel excise) that was less than the growth in household income."

"The introduction of hybrid and electric cars will further reduce the per-kilometer cost of travel and further encourage travel in private vehicles. These cars have entered the market rapidly - in the first half of 2018, hybrid cars accounted for more than 15% of passenger cars sold, compared with just 4% in 2016 - and so it is vital to change policy, that is, to make travel by private car dearer and to improve the public transport infrastructure with the aim of encouraging a reduction in the use of private vehicles."

Beyond taxation policy and the fall in the prices of imported vehicles, the study finds that road congestion has increased in the past two decades because of economic processes as well. Among these processes is a rise in the standard of living and wider distribution of places of employment at the same time as the population has spread. The rise in the standard of living contributes to rising road congestion through the rise in the rate of vehicle ownership, on top of rapid population growth.

Published by Globes, Israel business news - en.globes.co.il - on February 11, 2019

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

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Ayalon Highway  photo: Eyal Izhar
Ayalon Highway photo: Eyal Izhar
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