Insufficient funds: Electric car purchase tax to increase to 50% in 2025

As part of the efforts to increase government income for funding the war and security costs and for reconstruction afterward, the Finance Ministry is targeting electric car owners, imposing billions of shekels in decrees on them.

Increase in purchase tax: After at the beginning of the month, the purchase tax on electric cars increased from 20% to 35% and the maximum discount decreased from NIS 60,000 to NIS 50,000, which is expected to increase the cost of popular electric cars by approximately NIS 12,000, the tax will rise again in less than a year, on January 1, 2025, to 50%, and at the same time the maximum discount will decrease to NIS 35,000. Furthermore, on January 1, 2026, the purchase tax will rise to 57% and the maximum discount will drop to NIS 30,000, and on January 1, 2027, it will rise by a third, to 65%, with a maximum discount of only NIS 25,000. It should be noted that the move made this year is expected to bring in NIS 1 billion alone, and the next three increases will each bring in a larger sum against the backdrop of the expected rise in electric car sales.

Travel tax: Starting January 1, 2026, electric car owners will pay a tax of 15 agorot per kilometer, totaling several thousand shekels per year. The more they drive, the more they will pay. Electric car owners are exempt from paying the high taxes imposed on gasoline and diesel, which this month returned to a level of about 70% of the consumer price per liter. The Finance Ministry says that the travel tax will not replace the fuel tax (Blue Tax) which is supposed to compensate for the air pollution caused by vehicles, but rather for the extensive use of electric vehicles on roads and parking lots. An average electric car travels about 20,000 km a year, so it would be liable for approximately NIS 3,000 per year. There are about 100,000 electric cars in Israel, which could bring in around NIS 300 million to the state treasury.

Cancellation of the discount in vehicle licensing fee: Today, all owners of electric vehicles, from buyers of the Leapmotor T03 at NIS 100,000 to the Porsche Taycan Turbo S at NIS 1.55 million, pay a uniform licensing fee of  NIS 530 per year, which otherwise could reach NIS 4,700 per year. The treasury wants to cancel the benefit that costs the country about NIS 170 million and is worth an average of NIS 1,700 per year, starting from January 1, 2025.