Israeli Energy Minister Yuval Steinitz says that only a full exemption can encourage public transport to switch to natural gas
03/01/2016, Hedy Cohen and Dubi Ben-Gedalyahu
Minister of National Infrastructure, Energy, and Water Resources Yuval Steinitz is demanding that members of the ministerial committee for examining fuel taxation policy (Environmental Taxation III Committee) grant a full 10-year tax exemption on natural gas for public transportation, sources inform "Globes." While the committee is expected to recommend a lower tax for natural gas than for diesel fuel, the Ministry of National Infrastructure, Energy, and Water Resources is asserting that only a total exemption can encourage a transition to natural gas.
Even though the Tamar gas reservoir was discovered seven years ago, public transportation in Israel is run entirely on refined oil products. The Zemach Committee, which formulated the government's policy on development of the gas sector and gas exports, predicted that by 2040 a third of all private vehicles and two thirds of all public transportation vehicles would be converted to natural gas, while consumption of gas for transportation would reach 40 BCM.
According to transportation and energy sectors sources, however, there are several barriers that have hitherto prevented the penetration of gas-powered vehicles. The most important of these is the absence of any policy concerning the taxes to be levied on gas-powered vehicles.
For the past three years, the Environmental Taxation Committee in the Israel Tax Authority has been considering the proper purchase tax, what taxes should be levied on imported systems converted to natural gas (including trucks and buses), and how much the natural gas itself used as fuel for transportation should be taxed. The committee was scheduled to submit its recommendations more than a year ago, but has not yet done so.
As reported exclusively in "Globes" last week, the committee is expected to submit its recommendations in the near future. These are likely to include reduced excise tax on natural gas for transportation (between one third and one half of the excise tax on diesel fuel), accelerated depreciation for natural gas filling stations, accelerated depreciation for natural gas-powered commercial vehicles of more than 4.5 tons, a safety net for natural gas filling stations for supplementing income below a given threshold, tax benefits to encourage methanol fueling infrastructure, and more.
Sources inform "Globes," however, that in internal talks between Steinitz and officials in his ministry he is demanding a full exemption on excise tax for natural gas used in transportation for at least 10 years. Steinitz is asserting that this is the only way to encourage a massive switch to natural gas in public and private transportation. Only when 40% of the trucks and buses are powered by natural gas can the tax be increased slightly, ministry sources claim. Sources close to the committee said that Steinitz's demands were unreasonable, since a full tax exemption for natural gas meant the loss of NIS 4 billion a year in state revenue.
State revenue from taxes on fuel in Israel totals NIS 17 billion a year. According to Steinitz, the state receives the same billions is loses in taxes through the tax it levies on the gas companies through the Sheshinski tax. Imposing any excise tax whatsoever on natural gas for transportation, even if it is significantly lower than the excise tax on diesel fuel, is in effect a double tax.
Published by Globes [online], Israel business news - www.globes-online.com - on January 1, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015
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