No Gas Taxes for Electric Cars? No Problem, Says Tax Authority

One of the benefits of all-electric vehicles for drivers is the money they save on filling up vehicles with gas – a not-insignificant expense in Israel, where a gallon of gas hovers around $7. But what consumers save by avoiding the gas station, the government loses in taxes that are not paid on that gas – so in order to make sure that electric car drivers are paying their “fair share,” the government plans to impose a mileage tax on electric vehicles, a report in Calcalist said.

The report cited an internal document in the Tax Authority that discusses taxation for both electric and hybrid vehicles. Purchase taxes on electric vehicles, imposed as of January 1, are 10 percent, and the Authority does not plan to raise this. The purchase tax on hybrid vehicles is 30 percent – the average purchase tax on a regular combustion engine vehicle in Israel is close to double that – and that lower tax rate will be renewed at the end of 2019, when it is set to expire.

Instead of raising the purchase tax on electric vehicles, the Authority has decided to slap on a mileage tax, which will be paid on the basis of how many kilometers a vehicle is used each year.

The document says that until now, there have been relatively few all-electric vehicles on Israeli roads, but a batch of new models will go on sale in the second half of 2019, and the Authority needed to be prepared for the tax implications of the increased popularity of electric vehicles, the report added.