High Court Turns Down Attempt to Stop New 'Green Taxes' on Vehicles Starting Today

July new car sales jump before prices go up, but are still well below last year.

The High Court of Justice rejected a request for a temporary stay against implementing the new "green taxes" on new cars. The High Court accepted the Finance Ministry's arguments, and the new taxes will take effect from today as planned

Three car importers asked the court to order Finance Minister Yuval Steinitz to halt the tax changes, claiming they constitute intervention in the free market that is unauthorized and lacks a legal foundation. Under the new law, the purchase tax on new cars is derived from a number of factors, including their relative contribution to pollution. The plaintiffs claimed such a differential tax had no legal basis. In addition, they said the method of calculating pollution was based mainly on the quantities of harmful gases emitted, but did not take into account other factors as gas efficiency and savings, or greenhouse gas emissions, as is the case in other countries.

The court criticized the car importers. Justice Asher Grunis wrote that the plaintiffs waited over a month to file, even though they knew when the taxes would take effect. He said they also did not appeal first to Steinitz or his ministry, a prerequisite to turning to the court except in special circumstances. Finally, Grunis said he was not convinced the request stood a good chance of being accepted, and ordered the plaintiffs to pay NIS 30,000 in court costs. However, he did give them 10 days to decide whether to continue with their case despite the justice's refusal to issue the temporary stay they requested.

The importers who brought the suit mainly sell European cars with diesel engines, which emit little carbon dioxide, a greenhouse gas, but a relatively large amount of nitrogen oxide, considered a pollutant; as such, their models will be taxed more under the new arrangement.

July will most likely mark the high point for 2009 car imports. Just before the August 1 "green taxes" take effect, Israeli consumers took advantage of the lower prices and bought over 20,000 new vehicles in July. This compares to 18,000 in June and only 12,000 in May. The June numbers were also affected by news of the new taxes.

This worked out to 800 to 1,000 new cars per business day. In addition to the new taxes, the drop in the dollar and the Japanese yen also allowed importers to offer better deals.

However, even with the July numbers the totals for 2009 are not even close to the record sales of 2008. In January 2008 around 25,000 cars were imported into Israel.

Many of the cars imported last month will only be delivered to their new owners this month, as the rush was to release the cars from customs before the new taxes took effect.

The full effect of the taxes will only become clear today as car importers issue their new price lists. SUVs, luxury models and other big cars are expected to go up in price, while small cars should be somewhat cheaper. The prices of many popular models are not expected to change significantly.

The recession is also affecting garages and car owners. More people are fixing their old cars, but paying less to do so.

The number of car repairs rose in the first half of 2009, but the average cost of the work fell slightly. The average repair job declined to NIS 1,071 in the first six onths of 2009, compared to NIS 1,132 in the same period last year, according to figures released last week by Gama Management and Clearing, a financial management and business information company.

The number of cars being repaired was up 6% in the same period, at 320,000 total garage visits, up from 302,000 the year before.

Gama CEO Ariel Ganot said the numbers reflect the decline in new car sales in the first half of the year, with people needed to fix their older vehicles more frequently. He said this was similar to what happened during the 2001-2004 recession, when repair garages found themselves busier.