Taking Care of Tycoons

After a year full of conflict and pressure from all sides, the treasury wound up last week with a shrunken, cushy set of reforms.

So who won the battle over raising taxes on company cars?

After a year full of conflict and pressure from all sides, the treasury wound up last week with a shrunken, cushy set of reforms. These reforms spread out the tax increases for workers with company cars over four years, and also have a much smaller impact than the original plan would have had.

At the same time, the treasury agreed to compensate those earning gross salaries of NIS 8,000-20,000 a month with another tax cut. The final result is minimal damage to the lucky ones with cars, and no big shocks to the car industry.

So who really won? People with company cars? Not at all.

The real victory goes to a long list of huge corporations, starting with the leasing companies, continuing with the car importers, and finishing with service and equipment suppliers in related sectors - all of whom did not want the reforms, and had good reason to fear them.

The drivers had no real voice in the struggle. No one actually consulted them or listened to what they had to say.

It was really a battle of the titans who saw how an entire, enormous industry with incredible economic influence was likely to shift out from under them and create a whole new market equilibrium.

Sales of new cars in Israel total NIS 15 billion every year. These revenues have created car tycoons like Yitzhak Tshuva, Yitzhak Manor and Jacob Shahar, who have expanded their control into other industries, too.

There are also many others in the business, such as insurance companies, garages, and advertising agencies and other media outlets, which enjoy enormous advertising budgets from the car industry.

This week's victory was theirs, and the next victory will be theirs, too.

The car industry provides the state with enormous tax revenues. Sales taxes and customs total NIS 7 billion a year. If we include the annual state revenue from licensing fees, NIS 2.5 billion, and fuel taxes, NIS 11.5 billion, the picture becomes quite clear: It is extremely easy to upset the balance in the industry, and it is also quite tempting to do so, since every small change has a clear effect on the bottom line, and we are talking about a great deal of money.

Over the next few years, the Finance Ministry is planning to reduce further the purchase tax on cars - a just and intelligent move that will benefit consumers. This tax is among the highest in the world of its kind, and there is absolutely no reason for it to remain at this level.

Even those in the car industry should be grateful for such moves, since lower taxes mean more new cars sold, which will in turn flood the roads with hundreds of thousands of more cars every year.

So now is time to start investing in new roads.