Israel to Change Car Tax Breaks: What Will Happen to Prices
Israel's Finance Ministry has sent importers a new formula for calculating the green tax, which will take effect on January 1, 2027. Due to stricter environmental criteria, some models will receive a smaller tax break, but prices may not rise thanks to competition and discounts.
On Monday, August 10, Israel's Finance Ministry sent car importers a new formula for calculating the green tax, which will apply to new cars starting January 1, 2027. Due to changes in environmental criteria, some models will receive a smaller tax break, but this will not necessarily lead to an actual price increase. Currently, new non-electric cars are subject to a purchase tax of 83%, from which a discount of up to 18,000 shekels is deducted. The new formula accounts for carbon dioxide and hydrocarbon emissions with coefficients of 220 and 9.77, respectively; the result is divided by 100 and multiplied by 0.75. According to importers' estimates, the formula will tighten the environmental score calculation by 15–20%, leading to reduced discounts for some models. However, importers may offset the increase with discounts or additional equipment. Furthermore, the new rules will only affect cars cleared through customs after the formula takes effect, so in early 2027, cars imported under the old scheme will still be on the market. Price increases are tempered by competition, especially from Chinese models, as well as the entry of the 'Rami Levy' chain into the market. In November, the 'Euro-7' standard will be introduced in Europe, which could reduce emissions of new models and improve their ratings. The electric vehicle market also limits price increases: if gasoline and hybrid cars become significantly more expensive, buyers may switch to electric. An actual price increase is possible, but mainly for models sold to fleets, while private buyers will be offered discounts and promotions.