Finance C’tee approves profit tax on natural resources, funnels revenues to Negev

According to the Finance Ministry, the move would increase the state’s revenues by NIS 500 million a year and put taxation on natural resources closer to that of oil and gas.

By NIV ELIS
The Knesset (photo credit: KNESSET SPOKESMAN'S OFFICE)
The Knesset
(photo credit: KNESSET SPOKESMAN'S OFFICE)
The Knesset Finance Committee on Sunday unanimously approved the central recommendations of the Sheshinski 2 Committee that have languished for well over a year regulating non-oil and gas natural resources.
“The nation’s natural resources belong to its citizens and they should benefit from them while allowing further benefits in Israel,” committee chairman MK Moshe Gafni (UTJ) said.
The recommendations, which will impose a windfall profit tax of as much as 42 percent on companies mining natural resources, passed after the approval of an amendment that would funnel the revenues toward a special fund to invigorate the Negev with infrastructure and investment incentives.
The Sheshinski 2 Committee recommended that natural resources be taxed uniformly at 5%, but that companies making huge profits off them pay extra taxes. A company bringing in a 14%-20% rate of return would pay a 25% surtax, while those bringing in more than 20% in profits would pay a 42% surtax.
The recommendations came from the committee headed by professor emeritus at the Hebrew University of Jerusalem Eytan Sheshinski, who also led a previous committee on taxing oil and gas resources.
According to the Finance Ministry, the move would increase the state’s revenues by NIS 500 million a year and put taxation on natural resources closer to that of oil and gas.
The regulation was already inexorably linked with the country’s desert South, and will affect Israel Chemicals (ICL), the Negev’s largest employer, more than any other company. In the past year, ICL has argued that excessive regulation will make some of its operations unprofitable, and force it to cut jobs and invest abroad. A massive strike in the run-up to March’s general election saw major Southern cities shut down over the fate of ICL workers.
Zionist Union MK Miki Rosenthal said the law fixed a historic injustice.
“After years in which ICL fraudulently concealed royalties, and despite the cynical use of workers and attempted extortion, soon the company will pay a fairer tax on the use of public natural resources,” he said.
Zionist Union MK Shelly Yacimovich, Likud MK Miki Zohar and Rosenthal spearheaded the amendment to create an investment fund, helping pave the way for the unanimous vote that Yacimovich said was all too rare in the highly politicized Knesset.
The new investment scheme is expected to bring in NIS 2 billion from potash alone, and another NIS 650 million from copper, according to Amir Barkan, the Prime Minister’s Office deputy director for economy and infrastructure.
In a sharp exchange, ICL Chairman Nir Gilad said the deliberations proved that “there is no economic rationale for investing in Israel,” and said that the law would result in closures, job losses and loss of investment. ICL has recently made large investments in Amsterdam and Ethiopia.
Yacimovich shot back that Gilad was the highest salaried man in the country, earned NIS 10,000 for every hour he appeared before the committee.
“Suddenly, he feels full identification with the Negev. A real Ben-Gurion,” she said. Gilad retorted that he had made a greater contribution to the Negev than any Knesset member.