For the first time, tax rates on vehicles is linked to the level of pollution emitted by these vehicles
The Israel Tax Authority published last week an analysis of the effect of the green tax reform on automobile sales in Israel.
Israel's Green Tax reform went into effect on August 2, 2009. The reform sets tax incentives aimed at reducing vehicular air pollution. The reform comes in the wake of the recommendations of a Green Tax Committee, which included representatives of the Ministries of Finance, Transportation, National Infrastructure and Environmental Protection.
The tax reform largely relates to changes in purchase taxes imposed on new motor vehicles weighing less than 3.5 tons. For the first time, tax rates on vehicles is linked to the level of pollution emitted by these vehicles. Relatively clean vehicles will enjoy a significant tax benefit and lower sales prices while polluting vehicles will cost more in the wake of the reform.
According to a Tax Authority analysis, a “positive trend” is apparent.
Tax officials stress that the average green score for passenger vehicles sold in Israel from June 2008 to July 2009 was 199. By comparison, the score from August 2009 to June 2010 decreased by 4% to 190.9 (a high score indicates high emission levels).
Tax Authority officials also stated that the supply of environmentally friendly cars is increasing. They emphasized that the emissions scale will be revised in 2012, making the criteria for obtaining green grades more stringent, which will directly influence the tax imposed on the cars.
Despite tax authority assertions regarding the success of the green tax reform, sources in the automobile sector voiced very different opinions. According to a senior official in the sector, the prices of popular cars are virtually identical, despite the fact that their emission levels differ.