The Israel Tax Authority’s revised formula for taxation of the environmental impact of private vehicles will send prices soaring when it goes into effect next January, Globes reported on Sunday.
The new formula reclassifies most popular car models, placing them in a higher tax bracket of 15 different categories of polluters.
Barring any major change in the exchange rates, the new formula will result in a 2-5 percent price increase for many models, mini-cars in particular, which until now have been the leading beneficiaries of the environmental tax benefit.
The impact may be dramatic, with prices rising by tens of thousands of shekels, possibly destroying demand for the affected models.
Auto industry sources predicted a surge of purchases by auto importers and car leasing companies toward the end of the year as they seek to avoid the price rises.
On the other hand, there will be no significant change in the price of luxury cars and four-wheel-drive field vehicles, which are already taxed as high polluters.
The coming revision will also affect a number of hybrid car models, such as executive hybrid cars, currently in pollution group 2, and which will be moved to pollution group 3. That will mean they lose the tax benefit granted in Israel for its type (30 percent purchase tax, instead of 82 percent).