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The Knesset Finance Committee's debate on the green taxation reform yesterday morning ended in a stalemate. In a prepared statement, committee chairman Moshe Gafni announced that he would not accept the current wording of the ordinance, and demanded that taxation on cars be reduced.

The Tax Authority is to submit an amended version next week. If its version is rejected again, the green taxation ordinance will be cancelled at the end of November: Tax on vehicles will revert back to 75% from the current level of 90%.

Despite the difficulties, the green taxation reform is expected to be approved next week, on condition that the Finance Ministry cut the maximum purchase tax rate on new cars from 90% to 85%.

Diesel car importers, who would be hurt by the reform, were represented by Dori Manor, chief executive of David Lubinski, importers of Peugeot and Citroen vehicles.

Manor believes that the reform should also address fuel consumption rates. Delay of the decision allows diesel car importers and their lobbyists time to pressure the Finance Ministry. Since the Tax Authority does not wish to amend the ordinance's wording, pressure is being directed at Finance Minister Yuval Steinitz himself, TheMarker has learned.

Vehicle fleets, represented by the umbrella group of transportation managers and forum of high-tech drivers, issued a position paper Monday protesting the expected increase in the price of vehicles.

Importers of European cars, who market a wide variety of diesel vehicles and whose business will be hurt by the new tax structure, have meanwhile hired a professional lobbying firm.

The European car importers support the green taxation reform, but want the formula amended to place a greater emphasis on reduction of greenhouse gas emissions (as opposed to emissions of other pollutants).

They argue that the finance minister's formula for calculating the green tax is based on data from the late 1990s, which do not take into consideration changes in Israel over the past few years, and the fact that carbon dioxide emissions have increased while other health-affecting components are decreasing.

To meet international goals that Israel has set for itself, green taxation with the aim of reducing greenhouse gases should be introduced immediately, they say.

Meanwhile, in a debate in the Knesset Interior and Environmental Protection Committee Monday, Environmental Protection Minister Gilad Erdan said that he would recommend that the government adopt the most ambitious aim for potential reduction of greenhouse emissions. Yesterday's debate included presentation of a report from American consultancy McKinsey indicating that greenhouse gas emissions here would double by the year 2030, and that transportation is responsible for 18% of all emissions.

The Finance Ministry has not responded officially to these claims, but behind the scenes, Knesset members are being presented with different figures.

Regarding the claim that greenhouse gases are reflected in the cars' pollution ratings, the Finance Ministry said that carbon dioxide emissions are heavily weighted in the taxation formula.

Countering the argument that green taxation will hurt diesel vehicle sales, the Finance Ministry offered figures for deliveries of new diesel and gasoline powered vehicles in recent years, when tax rates on the two types of vehicles have been similar.

The data indicates that while gasoline vehicles are the preferred choice among private citizens (95%), diesel vehicles are preferred for commercial use (80%). The reason is not tax, but the frequent lack of automatic transmission in diesel vehicles, cost of maintenance and the estimated retained value.