Green car tax reform to go into effect August 2

Discounts could save buyers up to NIS 15,000.

electric car vehicle 248.88 (photo credit: )
electric car vehicle 248.88
(photo credit: )
After reaching agreement with industry representatives, the government's green tax reform plan will go into effect in two weeks. The Knesset Finance Committee must approve the tax regulations, but will presumably not raise any objections since the plan was modified to meet industry demands. The reform plan, which goes into effect on August 2, focuses mainly on restructuring how automobiles are taxed, as well as car fuel. Since the plan was first announced at the beginning of June, the maximum tax rate on cars was dropped from 92 percent to 90%. In addition, the value of company cars will be calculated in a linear fashion as of January 1, 2010. As of January 2010, the value will be 2.19% of the book value of the car, which will rise to 2.5% in 2011 - barring drastic changes in the cost of cars. The reform plan will not be retroactive and will not apply to any cars already on the road. The green tax reform totally overhauls the current method of taxing vehicles. Under the new system, the base tax rate for cars will be 90% as opposed to the current 75%. However, buyers will get a discount based on the pollution level of the car. All of the cars have been graded according to a 15-level table, ranging from non-polluting electric cars to highly polluting SUVs. The discount could translate into as much as NIS 15,000 or as little as NIS 2,000. In effect, the new system will make certain smaller, more efficient and less polluting cars cheaper than they are now, while other higher-emitting cars will become more expensive. For example, the Toyota Corolla, Peugeot 207, Volkswagen Golf, Seat Ibiza, and Chevrolet Aveo will all become cheaper, according to the Tax Authority. The tax rate on others like the Mazda 3 or the Skoda Favia will in effect remain the same. Electric cars will be taxed 10%, and hybrids will remain at their current rate of 30%. While the joint Treasury and Environmental Protection Ministry initiative is expected to bring in NIS 400 million to state coffers, it is also intended to draw the public's attention to the air pollution generated by cars. The reform goes hand in hand with Environmental Protection Minister Gilad Erdan's efforts to force car importers to list pollution rates for cars in addition to the other specifications. Transport vehicles produce about a quarter of the air pollution in Israel. While much of that pollution comes from heavier vehicles like trucks, the tax reform will not yet include them because of a lack of accurate data on pollution rates for those types of vehicles. However, the depreciation value of a hybrid truck will stand at 25%. For the first time, those wishing to buy taxis will have to pay an 8% tax. However, certain makes and models of cars will in effect be tax-free, according to the pollution rate chart. Until now, taxis could be bought without tax. The green tax reform targeted taxis for the first time because of the fact that they are used far more often than private cars and thus generate more pollution.