(photo credit: Miriam Alster / Flash 90)
Bank of Israel Governor Stanley Fischer on Wednesday gave his full support to the Sheshinski Committee’s recommendation to raise taxes on gas and oil profits and called upon the public not to be influenced by “dirty tactics” of interested parties.
“There is no question that the current situation in which the government gets only a third of gas and oil profits, representing the lowest share among developed countries, is not reasonable and not acceptable,” he said at a conference in Jerusalem. “It is clear that change is necessary. In most gas-producing countries the share ranges between 40 percent to 60%. The outcome of the decision over a change on gas royalties will affect the country in the coming decades.”
Last week, the Sheshinski Committee presented its final recommendations to raise the government’s take on gas profits to between 52% and 62%, up from the current 30%. It proposed to levy a progressive tax on part of the gas and oil companies’ profits, after they recoup 150% of their investment on their gas-field projects.
The tax rate would range from 20% to 50% depending on the volume of the profits.
Fischer praised the Sheshinski Committee for finding the right balance between the need to give entrepreneurs incentives for exploration while generating reasonable profits and to secure a fair share of revenues generated from natural resources to the public.
He said the Sheshinski Committee had taken into account energy policies in other countries and the special conditions inherent in Israel, including suggestions brought forward by the private sector, and made changes as necessary.
Fischer spoke against the demand by National Infrastructures Minister Uzi Landau and gas exploration companies to exclude the Tamar offshore gas field from the final recommendations.
“It is clear today that only by the end of the decade we will start to see the growth in government revenues from gas reserves have a significant impact on the state budget, although the impact on the foreign exchange and stock markets is already felt today,” he said.
Fischer said the gas exploration companies and interested companies were waging an aggressive and unacceptable campaign against the Sheshinski Committee’s recommendations “I respect Israeli and US gas entrepreneurs, and I am thankful for their contribution to Israel,” he said. “They have every right to try and influence the outcome of the recommendations as long as they behave in a civilized manner. But they cannot have a veto on the decision the government will take.
We cannot let gas entrepreneurs and interested parties influence the public with dirty tactics and personal attacks.”
The decision whether to adopt the recommendations is now in the hands of Prime Minister Binyamin Netanyahu and the relevant ministers, after which the cabinet and the Knesset will vote on them. The Finance Ministry expects that the final vote will be taken in mid-April.
“There may be need for minor changes along the way, but not major ones,” Fischer said.
Speaking at the same conference, Netanyahu said Israel must ensure that the blessing of higher gas royalties not turn into a curse.
“I think that the things our governor said earlier are right,” he said. “But I wouldn’t suggest that we build our vision and budget on gas. The finds are expected to be big, but not that big. It is not an alternative to entrepreneurship or development of excellence in other industries.”
Netanyahu reiterated the importance of establishing a sovereign fund for the proceeds of the country’s gas reserves that would be used mainly for investment into security and education.
The Finance Ministry on Wednesday published a public opinion survey that
found 63% of the public supports the Sheshinski Committee’s
recommendations to raise the tax on gas and oil resources, 14.3% believe
they favor the energy exploration companies, and less than 20% believe
they will harm the companies.
The survey was carried out Monday by the government advertising bureau
through an Internet poll of 509 Hebrew-speaking Jews not including