High Price of Israeli Cars Blamed on Taxes

The high price of cars in Israel was blamed on taxes in a government-commissioned report that was judiciously shelved in 2012, Globes reports.

The Shaldor Strategic Consulting report, an analysis of competition in the auto industry submitted to the Ministry of Finance in early 2012, was never made available to the Knesset Economic Affairs Committee. The last paragraph of the report may help to explain why.

“In terms of competitiveness in the new-cars segment, no material flaws were found in competition among the different importers, although competition is directly affected by the dominance of the leasing companies. Prices of new cars in Israel are high, mainly because of the substantial tax component, but if the tax component is discounted, price levels do not greatly deviate from prevailing levels in the world and are even lower in some cases,” states Shaldor.

That conclusion runs counter to the theory of Minister of Transport Yisrael Katz, who attributes the cost to price fixing and excess profits by importers, requiring regulatory intervention.

However, Shaldor concludes that the profit margins of Israel’s car sector — 15-25 percent of the importer’s price — do not deviate from prevailing levels in other countries.

According to Shaldor, it is the government’s own heavy taxation policy that is the culprit.

The comprehensive study of Israel’s car market was carried out in February-August 2012 and reviewed all segments of the market — new and used-car sales, garages, leasing companies, and insurance. The report was partly based on data that is not public knowledge, such as the financial reports of leasing companies, importers of cars and spare parts.

This article appeared in print on page 7 of the July 5th, 2013 edition of Hamodia.