The socioeconomic cabinet, headed by Minister of Finance Avraham Hirchson, has given its final approval to the Finance Ministry's proposal to double the use value of company cars over a three-year period.
The Finance Ministry presented the use value of company cars reform as an essential part of the ministry's general tax cutting plan, which is intended to create a fairer and more just distribution of resources as part of the government's program to narrow social gaps. The ministry argued that the planned transfer of the revenue from increased value of usage to the middle classes represented a just distribution of the burden and a far-reaching, socioeconomic move.
As a result, income tax will be lowered and people earning between NIS 4,270 to NIS 7,600 a month will have tax reduced from 17% to 13% by 2009, while those earning up to NIS 11,410 a month will have taxes reduced from 25% to 23%.
Meanwhile, the gradual increase in the value of use of a company vehicle is expected to net the Tax Authority about NIS 1 billion during its first year, planned in 2007, and NIS 2.5b. from 2009.
Following the final approval the Ministry of Finance will present its entire tax reform plan as a single reform package to the Knesset Finance Committee, which will include the company car use value tax reform.