Green Tax to push up car prices in Israel

New cars in Haifa Port Photo: Warhaftig Venezian

The prices of cheaper and more popular cars will rise by 2-5% from January 1, 2017.

The Israel Tax Authority today published the new formula for calculating the environmental tax on vehicles, to become effective on January 1, 2017. The formula calculates gives each car an environmental rating that puts it in one of 15 different groups, with the importer paying a different environmental tax for each group.

The new formula is much stricter than the previous one, with the most popular models in Israel being classified in higher pollution groups. The environmental tax benefit for these vehicles is therefore slated to be reduced by thousands of shekels. Auto industry sources said that if no significant change occurs in the exchange rates, the new formula would inevitably cause a 2-5% price increase for many models, with most of the price increases applying to the cheaper and more popular models, headed by mini-cars, currently the main beneficiaries of the environmental tax benefit.

On the other hand, there will be no significant change in the price of luxury cars and four-wheel drive field vehicles, because these are already classed in the highest pollution categories, and the environmental tax benefit is irrelevant to them.

In contrast to the previous revision of the formula, the 2017 revision will also affect a number of popular hybrid car models, such as executive hybrid cars, current classed in pollution group 2, and which will be moved to pollution group 3 when the revision is implemented, thereby automatically losing the tax benefit granted in Israel for such cars (30% purchase tax, instead of 82%). The change for these cars is expected to be extremely significant, with prices rising by tens of thousands of shekels, and imports of the models may even come to a complete halt. Auto industry sources said that as happened two years ago, a massive wave of purchases by auto importers and car leasing companies can be expected towards the end of the year in order to avoid the price rises.

The revision of the environmental tax is coming at a difficult time for the Ministry of Transport, which in its new campaign accompany the new auto licensing law is currently promising that prices of new cars will fall. As of now, it appears that prices will rise in the coming months, not fall.

Published by Globes [online], Israel business news - www.globes-online.com - on July 10, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

New cars in Haifa Port Photo: Warhaftig Venezian
New cars in Haifa Port Photo: Warhaftig Venezian
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