Steinitz: Gov't will not give in on natural gas finds tax

“If anybody believes that we will give up tens of billions of shekels that rightfully belong to the citizens of Israel, they don’t know what they are talking about, finance minister says.

November 23, 2010 23:57
2 minute read.
Finance Minister Yuval Steinitz

311_steinitz is feeling cross. (photo credit: Ariel Jerozolimski)

Finance Minister Yuval Steinitz said on Tuesday that the government will not back down to pressure regarding the fierce opposition expressed to the interim recommendations of the Sheshinski Committee to raise taxes on gas and oil finds.

“If anybody believes that we will give up tens of billions of shekels that rightfully belong to the citizens of Israel or back down from changes that conform with internationally accepted standards, they don’t know what they are talking about,” Steinitz said at a conference of the ministry’s capital market division in Tel Aviv on Tuesday.

“Since the Sheshinski Committee published its interim recommendations, there is suddenly much critical talk about development and financing problems of gas sites, creating a lot of pressure ahead of the final recommendations that are expected in a few weeks at the end of December. The pressure will not put us in a panic.

We will do what is required to serve the rights and the interest of the Israeli public,” he said.

Published last week, the interim recommendations of the Sheshinski Committee proposed to levy a special progressive tax on the profits of gas and oil exploration partnership companies, while leaving the gas royalty rate at 12.5 percent and canceling the depletion allowance. The committee estimates that if the recommendations are fully implemented, the government take of proceeds from large gas and oil fields will be boosted to 66% from the current 30%.

Steinitz added that OECD Angel Gurria secretary-general, who visited Israel this week, encouraged the move to increase the government take on gas and oil resources, since Israel was now a member of the organization that includes member countries that have introduced similar steps.

“There is no reason in the world why we should be different from Norway, Canada or Australia,” Steinitz said. “We need to decide if we are living up to the standards of an OECD member country or a banana republic.”

Following the publication of the interim recommendations, the Delek Group controlled by Yitzhak Tshuva, which is a partner in the Tamar offshore gas field, said that raising taxes on natural resources would harm the development of the field off Haifa that commenced a couple of months ago.

“I don’t understand those who back down to pressure when we are only trying to establish a policy that is accepted everywhere else,” Steinitz said.

He attacked the comments this week by National Infrastructures Minister Uzi Landau, who said the recommendations had already harmed the financing of the Tamar development.

Landau said the Tamar project has already been delayed by the uncertainty regarding the proposed changes to gas royalties and taxes and called upon the government to ensure the timely development of the gas field, in an effort to secure the country's electricity supply and energy independence.

In response to the concerns raised by gas exploration partnership companies, the Sheshinski Committee on Monday announced the establishment of a subcommittee to examine the claims and to ensure natural gas deliveries to the Israeli economy by 2013.

The subcommittee’s task will be to establish whether there are reasons for delays in developing the Tamar gas field.

Delek will be asked to provide assistance regarding the provision of figures that explain and show the immediate financing problem of the Tamar field and how it is related to the interim recommendations of the Sheshinski Committee.

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