New car purchase taxes put a dent in fuel-efficient small cars market

Published: 09.16.12

The Treasury’s new tax reform introduced several articles that have to do with green taxes applied to the import and sales of cars, but some say they might deal a blow to the smaller cars market.

The reform has set a new series of emission standards by which a car’s “green score” is calculated for tax purposes.
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The Treasury expects the new regulations to NIS 400 million (roughly $99 million) in revenues annually.

But the new calculation formula will also raise the prices for some car models, especially family cars – sometimes by thousands of shekels – because of the lower tax break.

The update will not affect luxury cars with big engines, such as SUVs and sedans. Such models do not enjoy green tax breaks because of their high green scores.

Under the new green tax, emission regulation for all vehicles will be updated annually, starting January 1, 2014, based in the fluctuations in the Consumer Price Index.

Sources in the automotive industry said that the green reform, though welcome, is plagued by exceptionally pad timing, as it coincides with skyrocketing gasoline prices.

The current format of the green tax updates – especially the tax break scale – are “virtually punitive” to consumers who wish to by fuel-efficient cars, one source said.

Car importers are set to submit their comments on the updated formula to the Treasury by next month.

Shahar Haselkorn contributed to this report,7340,L-4278659,00.html