Israel's Transport Ministry Releases New Vehicle Pollution Formula Impacting Hybrid Car Taxes

The Israeli Ministry of Transport has distributed a new pollution calculation formula to car importers, which could affect the pricing of new vehicles, particularly hybrids and plug-in hybrids. Currently, non-electric new cars sold in Israel are subject to an 83% purchase tax, with deductions of up to approximately 17,000 shekels based on emissions levels calculated from five pollutants, including carbon dioxide and particulate matter. The updated formula is designed to be flexible and can be adjusted every two years to impose stricter standards on more polluting vehicles.

Despite recent drafts from the Ministry of Environmental Protection introducing new pollution parameters such as tire particulate emissions, brake dust, and fuel vapor during refueling, the new formula does not incorporate these factors. Officials close to the Ministry of Finance explained that these parameters were considered but ultimately excluded due to time constraints.

The revised formula tightens emission thresholds, particularly increasing penalties for carbon dioxide and particulate emissions. Preliminary assessments by car importers indicate that "green" models like hybrids and plug-in hybrids could be reclassified two to five pollution categories higher, reducing their tax benefits by between 2,000 and 7,000 shekels. However, this reduction in tax incentives does not necessarily mean significant price increases. Given the current Israeli car market conditions, where about one-third of monthly sales occur in the last three days of the month amid weak demand, and the strong shekel against the dollar, industry experts expect most new models to maintain stable prices.