Sources inform ''Globes'' that the Ministry of Finance's Budget Department is considering raising the use value of company cars. Top department officials say that the current method, which uses a fixed 2.5% of a car's list price does not take into account changing fuel costs, resulting in the over-use of cars by their drivers for purposes other than work.
The main beneficiaries of company cars face a negligible marginal cost, because they do not pay for gas. Conversely, the cost to the state from the extra travel by company cars, including air pollution and traffic congestion, is estimated at billions of shekels a year.
The Budget Department says that the objective is not necessarily to increase tax revenues, but to correct a longstanding distortion by the new government, which has a social-environment agenda.
The draft 2013 economic arrangements bill, which "Globes" revealed in October 2012, included the addition of a separate item that weights the cost of fuel to the use value of company cars. The proposal's exposé infuriated MKs and ministers, and the Budget Department is now trying a different solution to raise the percentage of a car's price for calculating the use value.
Employees with a company car valued at NIS 130,000 pay a use value of NIS 3,250 a month. A 50-basis point hike in the tax rate would add NIS 750 to the car's monthly cost.
The Israel Tax Authority strongly opposes any change in the current use value structure, which was agreed upon with employers in 2008. Tax Authority sources say that the change would further hurt the middle class, which bears the bulk of the tax burden, and that it would cause labor unrest. Senior Tax Authority officials add that the current use value accurately reflects the real use value of company cars, and that there is no financial justification for changing it. Tax revenues from the use value, which are included in income taxes, total NIS 5 billion a year.
A Ministry of Finance official said in response, "Economic policy and budget priorities will be set by the new government when it takes up office."
Published by Globes [online], Israel business news - www.globes-online.com - on March 3, 2013
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