Report: Our car purchase tax among world’s highest

The tax rate on cars in Israel is five times the level in most European countries.

By GUY KATSOVICH/GLOBES
August 17, 2011 07:21
1 minute read.
Generic cars

cars 311. (photo credit: Ariel Jerozolimski)

The Israeli government is the main reason for Israel’s high car prices, according to the Jerusalem Institute of Market Studies (JIMS). Israel’s purchase tax is among the highest in the world, resulting in the need for 12 monthly salaries to buy an average car, JIMS said in a report Tuesday.

“Israel’s purchase tax is one of the highest in the world: 83 percent plus VAT,” JIMS researcher Keren Harel-Hariri said in the report. “The tax on spare parts and customers is effectively over 100%.”

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Discounts given to leasing companies and car fleets, compared with ordinary citizens, further distort pricing because the Finance Ministry favors companies with big car fleets, she said. The socalled green taxes, instituted in 2010, benefit only 1.24% of all car buyers, while taxes actually rose for most cars, benefiting the few at the expense of the many, she said.

The tax rate on cars in Israel is five times the level in most European countries, the report said. Several countries, including France, Italy, Germany and Luxembourg, only collect VAT on cars and spare parts.

Commercial car imports are taxed for customs, purchase and VAT. Taxes on cars are 113% to 128%, resulting in a lower proportion of cars in Israel than in Europe: 325 cars per 1,000 people, compared with 500 cars per 1,000 people.

The motor-vehicle sector suffers from a lack of competition, the report said.

“There are only 20 companies registered with the Association of Motor Vehicle Importers,” itsaid. “Seven to nine companies account for most motor-vehicle imports, and the top four importers account for half of all car deliveries.”


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