M.Sc Thesis

M.Sc StudentKeinan Tamar
SubjectThe Effect of Employer Car Taxation Policy on Car Ownership
and Vehicle Kilometer Travel
DepartmentDepartment of Civil and Environmental Engineering
Supervisor PROF. Yoram Shiftan
Full Thesis text - in Hebrew Full thesis text - Hebrew Version


Israel is listed first among Western Countries for the share of company cars in the new fleet (56%). The extent of this phenomenon is clearly influenced by the government tax policy in regard to employer provided car. The relatively low tax levy that is customary in Israel nowadays, leads many employers to offer their employees a car, without taking into consideration the high externalities of this tax policy, such as road congestion, air pollution and others.

The research objectives are to: 1. Analyze travel behavior of employees which are provided with a company car compared to employees who use their own car, in terms of travel distances and number of trips driven, and 2. Evaluate the effect of the government policy with regard to the personal use of company cars on Sustainability.

In research included a survey of hundreds of drivers, designed to assess the impact of personal use value and its taxation policy on employees' travel behaviors by stated preference questions. Only 9% of the drivers stated they would certainly give up the employer provided car after the expected taxation reform, and 50% would do so- in case the value will be 2000 NIS higher than planned.

Our conclusions are: First, the benefit of employer provided car generates an excessive number of trips and different travel behaviors. Second, the current taxation reform is expected to have a low effect on the demand for employer provided cars. Third, the effect of the reform on drivers of company cars depends on personal and household. Forth, employer's policy as for paying for the value of use and fuel expenses is crucial to the probability of any reform to have an effect on employee's travel choices. Fifth, in case employees will give up the company car, there's a significant change in the preferred commuting mode, so that the use of private cars will decrease, and the use of public transportation and other alternatives will increase.

Hence, our recommendations are to promote taxation policy that would embody the full real value of use. It is also necessary to determine the value of use in accordance with the actual use, and to enforce employers to report travel distances and fuel consumption. In addition, we suggest promotion of legislation to benefit public transportation users, such as "cash out free parking", or prohibition to offer employees car use benefits without a proper alternative.