Knesset members slam Israel Chemical for threatening to curb Israeli investments

"We have to fight against those who rob us from our rights to our national treasures," says Labor MK.

November 3, 2014 21:11
3 minute read.
A bulldozer works at a magnesium factory near the Dead Sea.

A bulldozer works at a magnesium factory near the Dead Sea. . (photo credit: REUTERS)

Knesset members blasted Israel Chemicals (ICL) on Monday for threatening to reduce company operations in Israel if the recent Sheshinski 2 Committee recommendations are adopted by the government.

“We have to fight against those who rob us of our rights to our national treasures,” said MK Micky Rosenthal (Labor), at a special Economic Affairs Committee session he initiated with MK Tamar Zandberg (Meretz).

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The committee convened to discuss the conclusions of the Sheshinski 2 Committee, which filed its recommendations on policies for taxing natural resources – excluding oil and gas – to the Finance Ministry on October 20. Also up for discussion at Monday’s session were the threats of investment cutbacks made by ICL, the company that would be most affected by approval of the recommendations.

The Sheshinski 2 Committee, headed by economist Eytan Sheshinski, a professor emeritus at the Hebrew University of Jerusalem, recommended that companies exploiting the country’s natural resources be charged a graduated surtax on all “excess profits” of between 25 and 42 percent.

A company with an annual rate of return of 14-20% would be charged a surtax of 25%, while a firm with a rate of return above 20% would pay a surtax of 42%, according to the committee. The recommendations would ensure, however, that the company would receive a rate of return of at least 14%.

Rather than charging varying royalty rates for exploitation of different minerals, the committee members recommended setting a uniform royalty rate of 5%.

If adopted, these changes would come into effect on January 1, 2017, and would boost the state’s coffers by NIS 400 million annually. The expected government take from the new recommendations would be 46-55% of revenue, according to the Finance Ministry.

After the Sheshinski 2 Committee revealed a set of more stringent, interim recommendations in May, ICL responded by freezing an investment program worth more than $1 billion, arguing that the high taxes would reduce its competitive edge globally. At the time, the company said that such changes would necessitate cutbacks and layoffs.

At the beginning of September, ICL announced plans to shut down its Dead Sea magnesium factory in 2017. The factory employs 550 people, about 10% of the company’s total workforce. The company also discussed plans to downsize its bromine plant in the Negev, which employs an additional 1,200 people.

When the Sheshinski 2 final recommendations were issued in October, ICL said that the committee’s recommendations “have not been altered in a substantive manner that would allow ICL to implement the investment plans in Israel that it intended to execute” before the panel’s establishment.

On Sunday morning, ICL workers applied sanctions and disrupted the delivery of goods at all of the company’s southern plants, Globes reported.

At the Economic Affairs Committee meeting on Monday, Avi Ben-Shoshan, chairman of the workers committee at the ICL magnesium plant, accused the company’s management of “earning millions and allowing themselves to exploit the workers.”

“They issued a statement about closing the plant, but it has nothing to do with the conclusions of the committee,” Ben-Shoshan said.

Rosenthal, meanwhile, called the threat of layoffs at the company an “idle threat,” and said that the true threat is ICL’s desire to extend its licenses beyond the year 2030.

“ICL has turned whining into policies and threats into a tool, and I suggest that they stop it,” Rosenthal said.

Zandberg added that the Sheshinski 2 Committee was established in order to restore natural resources to the public, and that the Sheshinski 2 recommendations pose no danger to the magnesium plant.

“At today’s discussion, when even the workers have spoken harshly against the management for using them, the unbridled cynicism of the company has been revealed,” Zandberg said.

She went on to accuse ICL of engaging in “manipulations in order to get more and more profits and dividends, making a clean sweep at the expense of the natural resources that belong to all of us.”

In response to the accusations, ICL’s manager for Israel, Avner Maimon, called the behavior of the Finance Ministry “not the most respectful,” stressing that “no company in the world” would bear the burden of such a high tax rate.

“The company will do what it needs to do and will not betray its shareholders,” Maimon said.

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