Taxes Collected on Vehicles Break Records

Eilat’s port is the main entrance for ships carrying loads of brand new cars to be sold in Israel. (Photo by Yossi Zamir/Flash90)

2019 is over, but the Tax Authority has only in recent days revealed information about how much it earned from taxes on vehicle imports in 2018 – and that sum has broken all records. According to the figures, Israelis paid NIS 10 billion in purchase tax on new cars. The figure jumped to NIS 11.1 billion when purchase tax for car parts is included. That made 2018 one of the biggest years on record for income for the state from vehicle purchase taxes.

The Authority collected 20% more in purchase tax in 2018 than it did a year earlier, and 32% more than a decade earlier. According to the Authority, that increase came despite the fact that 0.8% less in purchase tax was paid on average per vehicle, making the average amount paid per vehicle NIS 35,000 – 57.7% of the total cost of a vehicle. In 2018, the tax component of the average vehicle was 59.7%.

The increase in tax collection, the Authority said, was due to the sharp rise in car sales in 2018 compared to 2017, when fewer cars than average were sold due to changes in the tax structure for car imports. Analysts for Globes said the reduction in the percentage of taxes paid per vehicle in 2018 was due to the fact that more hybrid and electric vehicles were imported than a year earlier, and that taxes on those vehicles were lower than for regular vehicles. In 2018, some 20% of all vehicles imported to Israel were electric or hybrid.

When the figures for 2019 are published, there should be a similar result – but the “party” for consumers will come to an end beginning in 2020, when taxes on electric and hybrid vehicles are set to rise 15%, bringing them to the same level as regular vehicles – between 60% and 70% of the total cost of a vehicle.

According to the Finance Ministry, taxes on vehicles only seem high. “The level of taxes on imported vehicles counted for 3.7% of all taxes collected in 2018,” the Ministry said in a statement. “That was 0.8% of Israeli GDP for the year. When including purchase tax for vehicles, taxes on gas, license fees, and other charges, the full amount does not cover the costs to society associated with the use of vehicles, including the costs of keeping up roads, pollution, noise, etc. The overall amount in taxes paid by drivers was 3% of GDP, while the costs to society of having vehicles on the road was between 6% and 7% of GDP,” the statement added.

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