Treasury to Raise Company-car Tax

The treasury will support greater than planned cuts to income tax for mid-level salaries, in exchange for the Knesset Finance Committee's approval to increase the taxable value of using a company car, in an agreement being negotiated between the two sides this week. The treasury's plan, which would affect those earning monthly salaries of NIS 7,000 to NIS 16,000, will include a negative income tax, mandatory pensions and state-subsidized day care. The plan is likely to undergo a number of changes and then be submitted to the Finance Committee for a vote in the coming days.

The Finance Committee and treasury would like to see the proposal approved as soon as possible, and submitted for second and third readings by next week, before the Knesset begins its summer recess.Sources in the Knesset say that a larger income tax cut on mid-level salaries will soften the blow to company car users as a result of the increased value of use, and is meant to persuade Finance Committee members to support increased taxation on company car use.

Most members of the Finance Committee, headed by Chairman Stas Misezhnikov (Yisrael Beiteinu), are opposed to increasing the tax burden on the middle class. They have also come out against the treasury's original proposal to increase the value of company car use. The new draft may allow them to support the proposal as part of a package plan.

The value of use of a Group 2 company vehicle will also be increased to NIS 2,300 to NIS 2,500, instead of NIS 2,770 originally proposed by the treasury. Ninety Knesset members drive a leased Group 4 vehicle (which includes the Ford Mondeo, Mazda 6, Volkswagen Jetta and Mazda 5), and an increase of the value of use of a company car will lower net salaries for these Knesset members. The Finance Committee will be conducting marathon discussions over the coming days to obtain approval of the treasury's proposal.