Eytan Sheshinski 311.
(photo credit: Marc Israel Sellem/The Jerusalem Post)
Eytan Sheshinski, the professor who headed the state’s committee on taxing oil
and gas, will head a second committee examining how to tax other natural
resources, such as water and potash, Finance Minister Yair Lapid announced
The question of what royalties the state should receive from
private companies mining its natural resources aims to both incentivize
investment by private companies, typically considered more efficient than public
utilities, while also ensuring that all of Israel’s citizens benefit from the
resources’ extraction by adding to the government’s coffers.
committee was formed, given the “lack of uniformity in policy regarding payments
to the state for the use of a variety of national natural resources other than
gas and oil,” Lapid said, and will present its results by June 2014. In its
evaluations, the committee will consider the current systems already in place,
create a set of basic principles based on the different resources at hand and
their application in extenuating circumstances.
For example, the
government in recent months prevented an attempt by Canada’s Potash Corp. to
acquire Israel Chemicals (ICL), fearing that the foreign company could simply
move operations to the Jordanian side of the Dead Sea, resulting in massive
layoffs and an economic downturn in the Negev.
Though pledging to
cooperate with the committee and pointedly reminding the government that its
royalties had already doubled recently, ICL also said it “regrets that Professor
Sheshinski has already published certain opinions before the committee has begun
its work, resulting in the spread of inaccurate and misleading facts and
The company’s shares fell to a 19- month low following the
announcement, Bloomberg reported.
Opposition leader Shelly Yacimovich
accused Lapid of “pulling a rabbit out of a hat” to distract the public from
harsh measures in his budget, which was being considered by the Knesset on
“The taxation of natural resources could, at least in
part, have been imposed today,” she said. “I propose to Lapid to establish a
Sheshinski Committee on the NIS 15 billion in taxes he is imposing on ordinary
Earlier in the day, prior to the announcement, Yacimovich called
on Lapid to investigate the sale of Eden Spring waters to the US-based Rhone
Capital, demanding that he specify the royalties that would be paid for the
“How much in royalties will the buyers pay the state
treasury, and why hasn’t a committee been established to examine the use of
natural resources in Israel?” she asked.
That the government has chosen
to keep the rules from the original commission untouched came as a relief to oil
and gas companies operating in Israel.
In April, Noble Energy chairman
and CEO Charles Davidson told journalists he would reconsider the company’s
presence in the Mediterranean if the law was reconsidered.
raised after we had made investments, and that is very unusual in the industry
because if a government makes a practice of retroactively raising taxes after
investments are made, that scares off investors,” he said. “If [the Sheshinski
Committee recommendations] would be reopened, I think we would have to
reconsider everything we’re doing.”
Approved by the Knesset on March 30,
2011, the conclusions of the Sheshinski Committee determined a new taxation
method for oil and gas exploitation in Israel. Royalty rates would be kept
intact at 12.5 percent, but oil and gas profit levies would begin at 20% and
eventually rise to 60%, employing an “R-factor” formula, with net cumulative
revenues reduced by exploration and development expenses.Sharon Udasin
contributed to this report.