Steinitz: Tax on on hybrid, electric cars to drop

Finance Minister Yuval Steinitz decided Sunday to reduce the purchase tax on hybrid and electric vehicles, introducing it as part of the Tax Authority’s “green taxation” policy

Purchase tax on electric vehicles will decrease from 10 percent to 8% on June 1, before returning to 10% in 2014 and rising to 30% in 2015. Purchase tax on hybrid vehicles will remain at 30% in 2013 and increase to 45% in 2014, instead of rising to 45% and 60%, respectively, as originally planned

Steinitz introduced a separate purchase tax for plug-in hybrid electric vehicles (PHEV), which will start at 20% before rising to 30% in 2014, 45% in 2015, 60% in 2016 and full taxation in 2017. PHEVs share the characteristics of both conventional hybrid vehicles, boasting an electric motor and an internal combustion engine, and of an all-electric vehicle, with a plug to connect to the electric grid

The Finance Ministry said in a statement it hopes to strike a long-term balance in the way it taxes different technologies, allocating tax credits to vehicles according to how much they pollute. In the short term, the ministry said it was taking into consideration the difficulties non-polluting vehicles face in penetrating the local market

The Treasury said Sunday’s measure would cost it about NIS 130 million in revenues. Israel has one of the highest rates of purchase tax on regular vehicles in the world – 83% plus VAT

A spokeswoman for Toyota Israel, which first introduced hybrid vehicles to Israel with the Prius in 2004, told The Jerusalem Post the company welcomed the decision to reduce taxation on hybrid and plug-in vehicles. Toyota would introduce its first plug-in vehicle to the Israeli market in the coming months, she said

Mayer, which imports Honda Jazz hybrid electric vehicle, also said it welcomed the decision

“Without a doubt, maintaining the current tax rate will cause private and corporate customers to continue to purchase vehicles that save them from purchasing gasoline and that reduce air pollution,” the company said in a statement

A spokeswoman for Better Place Israel, which will soon launch its Renault Fluence ZE electric vehicles for commercial use, declined to comment.