Israel Excludes Brake and Tire Pollution from New Vehicle Tax Formula Due to Lack of Data

Israel recently introduced a revised formula for calculating purchase tax credits on new non-electric vehicles, effective from January. The updated formula, distributed by the Ministry of Finance to car importers, adjusts tax credits based on emissions from five pollutants, including hydrocarbons and carbon dioxide. Currently, new non-electric cars face an 83% purchase tax, with credits up to approximately 18,000 shekels depending on emissions levels.

Earlier drafts proposed by the Ministry of Environmental Protection included additional pollutants such as toxic particles from brake dust and tire wear, which affect both gasoline and electric vehicles. However, the final formula released this week omitted these pollutants. This change results in higher purchase taxes for some models, particularly hybrids, with tax credit reductions reaching up to 6,000 shekels. Despite this, industry sources expect no significant price hikes due to strong competition from Chinese manufacturers and a favorable exchange rate.

The exclusion of brake and tire emissions has raised questions about coordination among the Ministry of Environmental Protection, Ministry of Transportation, and the Tax Authority. The Tax Authority explained that Israel lacks a comprehensive data repository or reporting system to quantify emissions from brake and tire wear, making it operationally impossible to include these pollutants in the formula. They noted that the Euro 7 standard, recently adopted in Europe, addresses these emissions. Both the Ministry of Transportation and the Ministry of Environmental Protection declined to comment on the issue.