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Giving employees company cars cheats the system because the perk is not taxed realistically, Tax Authority official Boaz Sofer told the Knesset Finance Committee yesterday. Sofer said the usage value attributed to company cars is lower than the real cost of maintaining a leased vehicle. The committee held a hearing yesterday on the Finance Committee's proposal to raise usage value for company cars. The committee currently lacks a majority backing the treasury's position. Sources familiar with the situation believe the proposal won't pass unless significant changes are introduced.

Leasing company executives, automobile importers representatives, consumer organizations and Manufacturers Association officials attended the stormy hearing. MKs are demanding to raise usage value only from so-called Group 4 cars, including the Mazda 6, Ford Mondeo and Volkswagon Jetta. Three-quarters of all Knesset members drive Group 4 cars. Likewise, a demand was raised in the hearing to treat differently older cars and cars used by individuals who don't drive on Shabbat.

Sofer called the whole thing a sham because it's currently not worthwhile for an employee to give up a company car and receive cash instead. "The very fact that employers came to this hearing is an Israeli sham. All expenses are 100 percent tax-deductable for the employer. It's because until today the employer gave the worker a car and shut him up. It's not the money that interests us but rather the distortion of taxes. There's no attempt here to steal money."

Sofer added that the plan is to cancel the tax benefit which was available to only a limited portion of the population and to give it to everybody. "In the eighth decile, for example, only 20 percent have a company car. By canceling this benefit we'll be able to divide the money to the other 80 percent of workers," Sofer said.

Acting Tax Authority director Yehuda Nasradishi said tax rules for company cars concern a certain group. "There's a great preference here for whoever receives a company car and a tax of NIS 650 per month on a Group 2 car," he said. Nasradishi announced the treasury's proposal constitutes one comprehensive package: "conducting a negative tax policy, lowering taxes among the middle class and raising usage value."

Finance Committee chair Stas Misezhnikov said, "What stands before us is levying another tax on the middle class, and the treasury is attempting to correct a tax distortion. Whoever earns NIS 15,000 gross will lose another NIS 600 net from his salary."

MK Shelly Yachimovich (Labor) announced she would vote against raising the usage value, saying "a war over equality in Israeli society broke out over this specific issue, which is burning in your bones. A country that doesn't support the middle class is a country falling apart."

MK Haim Oron (Meretz-Yahad) expressed support for raising usage value. He said that among 250,000 company car users, 50,000 of them from the highest income category do not share in leasing costs for the car. At the same time Oron criticized the fact that the proposal is bundled in a bill with negative taxation and other changes.