Knesset C'tee approves "green tax" to boost gas use

Moshe Gafni, photo: Eyal Yitzhar
Moshe Gafni, photo: Eyal Yitzhar

Reimbursement for excise tax on diesel fuel will be eliminated.

Following many discussions, the Knesset Finance Committee, headed by chairperson MK Moshe Gafni (United Torah Judaism), today unanimously approved a reform advocated by the Ministry of Finance and the Ministry of National Infrastructure, Energy, and Water Resources. This reform is aimed at increasing the use of natural gas in public transportation, industry, and electricity production, while reducing the use of diesel fuel and coal, which are regarded as important causes of environmental and air pollution.

The reform is designed to bolster Israel's energy independence by reducing dependence on oil, while natural gas comes from local sources. It is also likely to encourage growth in investments in the transition to natural gas and development in the sector.

As part of the reform, reimbursement for the excise tax on diesel fuel, which enables various economic sectors, primarily transportation, to obtain tax refunds on the use of diesel, will be eliminated. A schedule for increasing the excise tax on compressed natural gas will go into effect, and taxes on coal will be raised.

The excise tax on coal will be raised from NIS 46 to NIS 142 per ton. The decision means that electricity rates will be raised by 2%, starting in 2019. At the committee's demand, the price of coal will be raised, starting in March 2019.

At the committee's decision, the tax hike for natural gas, which will take effect gradually, starting in 2024, will apply if there are at least 25 filling stations supplying natural gas.

According to the plan, taxes on natural gas for transportation will amount to NIS 0.02 per kilogram in the initial years, and will begin rising gradually after six years, with excise tax reaching NIS 1.40 per kilogram in 2028. At the same time, the excise tax refund for diesel fuel will be gradually eliminated, so that it will remain worthwhile for owners of heavy commercial vehicles to use natural gas.

It was also decided to allocate NIS 100 million to encouraging construction of natural gas filling stations. The allocation will pay for the cost of building 25 planned filling stations. The reform also includes tax incentives for upgrading the gas distribution network in Israel and NIS 150 million for promoting the entry of filling stations in 2019, as part of a NIS 500 million investment in a government plan to deploy distribution lines.

The plan also includes encouragement for the use of compressed natural gas in public transportation tenders, accelerated depreciation for vehicles powered by compressed natural gas at 25% for four years, and an administrative order granting exemption from licensing fees for five years. The reform allocates NIS 30 million to help purchase hybrid taxis and a cumulative usage benefit for complete reduction of import taxes after four years.

The Finance Committee also decided that by January 2023, the Ministry of National Infrastructure, Energy, and Water Resources director general and the Israel Tax Authority head would report to the committee the proportion of heavy vehicles purchased that are not powered by polluting fuel, and about progress in building natural gas filling stations. The ministries also stated that if gas powered vehicles did not account for 10% of all vehicles after five years, the plan and alternatives to it would be assessed.

In addition, the Ministry of National Infrastructure, Energy, and Water Resources director general, Public Utilities Authority (electricity) chairperson, and Ministry of Finance budget director will report to the committee by mid-March 2020 the effect of the tax increase on coal - a section added to the order out of concern for the general public.

Published by Globes [online], Israel Business News - www.globes-online.com - on March 15, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Moshe Gafni, photo: Eyal Yitzhar
Moshe Gafni, photo: Eyal Yitzhar
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