Billionaire Tshuva slams proposed tax hike on gas finds

Owner of Delek Group criticizes Shishensky C'tee's lack of expert testimony, gov't interference in efforts to develop domestic energy sources.

By JPOST.COM STAFF
November 12, 2010 21:26
2 minute read.
The Jerusalem Post

yitzhak tshuva 311. (photo credit: Delek group via Bloomberg)

 
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Israeli gas billionaire Yitzhak Tshuva expressed anger and disgust with the government's recommendation to raise a tax levy on exploited natural resources based on the findings of the Shishensky committee in an interview with Channel 2 anchor Yair Lapid that aired Friday night.

Tshuva, who repeatedly referred to himself in the third-person during the interview, claimed to Lapid that he had not even been invited to testify before of the committee despite the potentially important effect its findings stood to have on the value of his large offshore natural gas holdings. He also claimed that no experts in the field or from the Israeli business community were called to provide expert testimony to the committee before it reached its findings.

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Not only did the Israeli magnate express disappointment on behalf of the Israeli business community with the perceived lack of due process and honest dealing by the government in reaching its decision to raise taxes on natural resources. In particular, Tshuva expressed disbelief that Finance Minister Yuval Steinitz supported the committee's decision to raise taxes on the already operating Tamar field.

"I and the bankers who invested billions [of shekels] into the field received previous guarantees from the finance ministry [regarding future liabilities towards the state]," said Tshuva.

The majority owner of Delek Group Ltd. also expressed disgust with the government's interference in what he sought to cast as a patriotic effort to develop Israel's domestic energy sources.

"I invested billions here to develop a national energy source,  [Israeli] 'blue and white,' when no American, no foreign company" would set foot here, Tshuva said in reference to what he considered the government's lack of gratitude and seriousnes of purpose in developing Israel's domestic industry and energy independence.

The Sheshinski committee's main recommendations published on Wednesday were that the government's royalty rate on natural resource extraction remain the same, the depletion allowance for resource reserves be abolished and a gas and oil profits levy be introduced. The levy does not apply to the first years of production: eight years for medium to large reserves; fifteen years for small reserves. Reserves where profits are small should hardly be affected.



The committee estimated that the overall level of taxation will be two thirds over the life of a project for a profitable project. The levy will apply only after payback of the investment plus 50%. It will apply to each reserve separately. At a profit rate of 50% on the investment in the project, the taxation rate will be 20%. From 230% profit and upwards, the maximum taxation rate will be 60%.

Globes contributed to this report.

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