The Treasury has decided to delay implementing its plan to impose higher taxes on greener car purchases, fearing it would have a detrimental effect on potential voters in the nearing elections.
The green car tax reform was set to be launched on January 1, 2013, and would have added thousands of shekels to the prices of popular car models.
The Tax Authority's scaled discount model, which gives new care owners a purchase discount according to the car's fuel and emission efficiency ranking, has been in place for three years.
The mitigations, however, reduced the State's revenues on purchase taxes significantly, causing a deficit of some NIS 300 million (roughly $78 million) a year. The Treasury seeks to use the revenue for reduce the State deficit.
A panel of ministry experts has been tasked with updating the model, to reduce the tax mitigations, setting the implementation to the beginning of next year.
Since the change is one pertaining to existing regulations, that change does not require the Knesset's approval – just that of Finance Minister Yuval Steinitz and Environmental Protection Minister Gilad Erdan.
Treasury sources said that "The ministry has to carefully weigh whether implementing tax reforms three weeks before the elections is prudent, even though the decision itself has already been made."
The Treasury said that the reform will be carried out as planned. The Tax Authority said that "No directive has been given to suspend the reform and we are planning to go ahead with it as scheduled."