The Knesset Finance Committee on Wednesday approved the Finance Ministry's car-tax reform plan after a compromise was reached to lower the base purchase tax on cars to 83 percent instead of 90%.
New cars currently have a base tax of 90%, a hiike of 15% that was implemented in August, when the tax was raised from 75%.
The car-tax reform is part of the "green" tax system that will go into effect January 1. It will apply to new cars bought on or after that date.
The tax break on so-called electronic stability programs would be canceled, since car manufacturers need to provide it and therefore there is no reason to grant the benefit, Israel Tax Authority deputy director Boaz Sofer told the Knesset Finance Committee.
In addition, the "price brackets" method of "use value" on cars would be abolished, in favor of a "linear" method of calculating the value of use of a car, he said. A car's value of use is currently calculated based on its book value. Vehicle importers are expected to reduce the list prices of their cars to reduce value of use and increase sales, Sofer said.
Under the new method, the use value of a car worth up to NIS 130,000 will be lowered to 2.04% of the car price, starting next year, instead of 2.19% as originally planned. The use value of a car worth more than NIS 130,000 will be 2.48% of the book value of the car.
The reform follows recommendations of a Green Tax Committee, which included representatives of the Finance Ministry, the Transportation Ministry, the National Infrastructure Ministry and the Environmental Protection Ministry.
Knesset Finance Committee chairman Moshe Gafni said a new forum would be formed to examine the Finance Ministry's green tax policy, according to which certain smaller, more-efficient and less-polluting cars will be cheaper than they are now, while other higher-emitting cars will become more expensive.
"A nine-month review of the system will be conducted to see if it needed to be adjusted in any way," Gafni said.
Ehud Zion Waldoks contributed to this report.