Israel’s Finance Ministry Tightens Green Tax Formula, Raising Prices on Thousands of Cars from 2027

Israel's Finance Ministry has issued an updated pollution formula to car importers that recalculates the "green score" assigned to each vehicle imported into the country. This score places vehicles into one of 15 categories, determining the level of green tax benefits they receive. The revised formula significantly tightens the pollution values compared to previous standards, leading to an estimated price increase of 3,000 to 8,000 shekels on many car models starting January 2027, unless importers choose to absorb the cost.

The price hikes are expected mainly for the "greenest" vehicles, particularly hybrid models, while fully electric cars, which do not currently receive green tax benefits, are largely unaffected. Notably, the Finance Ministry did not incorporate the Environmental Protection Ministry's recommendation to include new pollution metrics unrelated to emissions, such as tire wear indicators, which were intended to reduce benefits for plug-in hybrid vehicles.

This adjustment reflects a stricter approach to environmental taxation on vehicles, potentially reshaping the Israeli car market by increasing costs on hybrids and other low-emission models. The changes come as part of ongoing efforts to refine environmental policy and taxation in Israel, with the updated formula set to take effect in early 2027.