Ministers Complain Over Luxury Car Tax - Get a NIS 2,000 Raise

Hefty after-taxes raise for ministers comes at a time when other segments of the public are being asked to show economic restraint.

Cabinet ministers' net salaries will evidently be growing by about NIS 2,000 a month soon. The reason: Several of them are demanding a reduction in the tax they pay on their luxury cars.

 Moshe Gafni, Yaakov Ne’eman
Emil Salman

As a result of the pressure, the Knesset Finance Committee will be asked next week to amend the relevant regulations so that the state pays a greater share of the taxes on the ministers' state-provided luxury rides.

This translates into a hefty after-taxes raise for ministers, at a time when other segments of the public are being asked to show economic restraint.

Justice Minister Yaakov Neeman recently asked Finance Committee Chairman Moshe Gafni (United Torah Judaism ) to discuss the issue in the community. Neeman, by the way, uses his own Lexus rather than a government car.

Neeman heads an ethics committee that is responsible for determining certain benefits enjoyed by cabinet ministers. Their salaries, however, are set by the Finance Committee.

The nitty-gritty

The problem started on January 1, when new regulations regarding the taxation of vehicles provided to employees by their employers - including cabinet ministers - went into effect. The ministers, whose salaries were cut by 5% in July to demonstrate solidarity with government cutbacks, began complaining that the changes will force them to pay thousands of shekels a month in taxes on their official cars.

Ministers receive a gross monthly salary of NIS 35,245, which translates into a take-home salary of between NIS 16,000 and NIS 17,000.

Most ministers are given either an Audi 6 or a Skoda Superb. A few, mainly those with large families, are given Chrysler minivans instead. The prime minister, defense minister, foreign minister, Knesset speaker and opposition head all are provided with larger, armored vehicles.

The catch is the tax. Anyone who gets a company car, including cabinet ministers and Knesset member, pay tax on the benefit of using the car, the so-called usage value, which since the beginning of 2010 is based on the vehicle's value. The more expensive the car, the more tax they pay, up to a maximum car value of NIS 467,160.

That means that ministers with more expensive cars pay more tax than their colleagues with cheaper ones. A number of ministers have told the Finance Ministry that they would like to to trade down in order to save money, but the state vehicle administration has refused.

The list price for the Skoda is NIS 285,000, and for the Audi it's NIS 438,000.

The value of the car is taxed as if it were additional income, which for the priciest ministerial vehicles comes to an additional NIS 8,620 a month in taxable income. This works out to about NIS 4,000 a month in taxes for the car.

The explanation

A number of ministers claim that because security procedures dictate that they be accompanied by a bodyguard on all trips there often is not even enough room in their cars for their entire families. In addition, the ministers claim they use their their vehicles for very little private driving, and therefore should get a break. Others say they never even drive their official cars for anything but official business, as the ministers never drive themselves and the car remains with their drivers when not in use.

The proposed change is simply to lower the fictitious amount of income added for using the car. For example, instead of paying tax on NIS 8,300 a month for the Skoda, ministers would be "charged" only NIS 4,000-5,000. This would save them about NIS 2,000 in tax. Taxes on the Audis would still be more, but ministers would still save about NIS 1,000.

If the committee approves the changes, the governor of the Bank of Israel and the state comptroller would also benefit. But many MKs fear that such a break would then also have to be given the president, judges, chief rabbis, mayors and of course MKs - as well as other senior government officials who can claim they also use their vehicles mostly for work.