The new usage tax based on kilometers traveled, which was approved this week in the revised 2024 budget, will apply from January 2026 to plug-in hybrid vehicles, and not just to pure electric vehicles. The Ministry of Finance confirmed this in a response to an approach by “Globes”.
The tax, at a rate of NIS 0.15 per kilometer, was originally planned to be collected only on pure battery electric vehicles (BEV), to replace the excise duty on gasoline and diesel, which of course such vehicles don’t use, and compensate the state for the loss of revenue. Sources at the Ministry of Finance said however that “modern plug-in vehicles also have a significant range of tens of kilometers or more using electricity only, and therefore in many cases, particularly on urban trips, they function as electric vehicles in every respect, and their contribution to congestion on the roads is only partially taxed.”
A source in the vehicle imports industry said, “This is a discriminatory and illogical measure. Plug-in vehicles, which are among the greenest vehicles on the road, will now be penalized with the heaviest taxation on any kind of vehicle: full purchase tax, the same as on gasoline vehicles after the cancellation of the purchase tax benefit in January 2024; excise duty on the gasoline they consume; and a travel tax to be imposed on them from January 2026.”
The assessment in the industry is that by the second quarter of this year new plug-in vehicles will become much more expensive because of the rise in the rate of purchase tax on them from 56% to 83%. Large importers of such vehicles, such as Lubinski and Telcar, are expected to reduce their imports of them or even to cease bringing them into Israel altogether. Plug-in models currently account for 80% of electric powered cars sold in Israel. The new taxation measures in the budget will eliminate the popular plug-in segment, and force many people to “regress” to gasoline vehicles or to regular hybrids, which are much more polluting.
Those with plug-in cars provided by their employer currently enjoy a reduction of NIS 1,000 in the amount assessed for tax purposes for private use, but that benefit too is in the Ministry of Finance’s sights, and the possibility is being examined of gradually cutting it until it is abolished altogether.
The revised 2024 budget also provides for a gradual rise in the rate of purchase tax on pure electric vehicles. In January 2025, the rate will rise from 35% to 45%, and will rise further to 52% in January 2026 and 60% in January 2027. The limit on the tax benefit will be lowered from the current NIS 40,000 to NIS 35,000 in 2026 and NIS 25,000 in 2027.
The budget bill also states that a new mechanism for “green taxation” will be examined for introduction in January 2026 through an average CO2 limit on all models brought in by each importer, “such that the mechanism will encourage the import of electric vehicles with low greenhouse gas emissions.” The intention is to fine importers that exceed the maximum average emission level.
The budget also provides for the formation of a team to formulate the regulatory and technological infrastructure required to collect an electricity tax via smart domestic charging apparatuses that will transmit data on power used for charging vehicles and allow the collection of higher electricity tariffs than apply to regular home power use. The team is due to submit recommendations within four months.
Published by Globes, Israel business news – en.globes.co.il – on January 18, 2024.
