The Society of Hi-tech Casualties

The Society of Hi-tech Casualties stands to be one of the winners from Prime Minister Ariel Sharon's collapse. Nor is it the only one.

The Society of El Al Fans, or in short the Borovich family and a few thousand workers of the formerly national airline, also do well from the situation: Tourism Minister Avraham Hirchson declared that he cannot possibly decide on adding a rival airline to the popular Tel Aviv-New York route with Sharon in such condition.

What Sharon's neurological functioning has to do with open skies - only Hirchson knows. It was probably just an excuse to retreat from the rather surprising support he showed until now for competition, a stand in favor of the consumer and against the interests of El Al. It is an excuse to revert to traditional protectionist Hirchson who watches out for El Al's interests exclusively.

The Society of Hi-tech Casualties, whose members have been traipsing hangdog through the corridors of the Knesset wearing sackcloth and ashes, can abandon the weeds of mourning. They can stop the show because the prime minister's ill-health handed them victory in their campaign against raising the tax on using a company car. The bill that would have done that has been suspended for the nonce.

Need for a car

The ones campaigning against the tax hike were mainly hi-tech workers. They are all middle class, they complained to the Knesset members, but if the tax break on using a company car is abolished, they couldn't afford to buy a car. In short the bill would hurt the middle class, and impair road safety, because less people would be driving new cars.

The Knesset members were amenable to that persuasion, without stopping to wonder why the battle over company cars was being spearheaded by hi-tech workers, of all people. Of all the sectors, the workers least needing a company car to do their jobs were hi-tech personnel. Their use of the car would be to drive from the home to work and vice versa. For them, the company car is nothing more than a bonus, given to some of the strongest workers in interest rates, at the expense of the entire public.

The only people not hurt by the new tax would be employers. They usually cut the cost of their payments to the car leasing company from the employee's salary. Say instead of grossing NIS 15,000 a month, an employee getting a company car would gross NIS 13,000 a month.

The employer couldn't care less either way, but for the employee, the second is better. His gross pay is NIS 2,000 a month lower but he gets a car that actually costs about NIS 4,000 a month to use. And the one financing the difference is the state: it treats company cars as a taxable perk.

Hm. 2+2=?

But the state, by coincidence of otherwise, got the math wrong. Instead of calculating that the employee received an NIS 4,000 bonus and taxing accordingly, the state calculated an addition of just NIS 1,300 a month.

In short, the state has been charging much less tax than it could for the use of a company car. It thereby made company cars one of the best deals in Israel.

Who got such perks? Workers strongly positioned enough to demand the management allocate them company cars. Sometimes companies needed to offer cars in order to get quality manpower.

But that perk has cost the state treasury about a billion shekels in lost tax income each year. The hi-tech community didn't think about that. One can think of better things to do with a billion spare shekels a year; maybe lower middle class taxes a little more, or sales tax on cars, giving the entire population a better chance of buying one.

Another result might be fairer competition in the car market, which is presently controlled by the powerful leasing companies. They get the discounts on new cars, not you. Since most car owners in Israel are private individuals, that means they are subsidizing the people driving leased cars.