Eytan Sheshinski 311.
(photo credit: Marc Israel Sellem/The Jerusalem Post)
By a sweeping majority of 78-2, the Knesset approved the Sheshinski Law on
Wednesday, increasing state benefits from natural-gas and oil
Finance Minister Yuval Steinitz declared victory following the
vote, describing the legislation of the controversial bill as a test for Israeli
democracy and its results as proof that money does not necessarily buy political
‘Public must be realistic about natural gas revenues'
Sheshinski bill on oil and gas taxation approved
“This is a correct and just law, in economic, social and moral
terms,” he said. “The situation thus far was extremely immoral. Israeli citizens
were the only people in the world who did not benefit from their country’s
“This struggle became one for Israeli democracy:
sometimes the debate was legitimate and sometimes it crossed red lines,”
Steinitz said. “But the moral and economic correctness of this law won. This law
is a badge of honor for the Knesset, for the coalition and the opposition, that
we withstood the pressures and made a correct decision in such a practical
“I have been an MK for 12 years and the finance minister for two
years, and I am excited by this moment,” he said at the podium after the law was
passed. “This was a formative, crucial moment, where the Knesset united its
support for this bill – coalition and opposition, religious and secular, Left
and Right. It is not every day that the house is unified like
Steinitz emphasized the difficulties faced by Prof. Eytan
Sheshinski and those who supported his position in favor of increasing taxation
on gas and oil profits.
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“When I decided a little over a year ago to
establish a professional committee to examine royalties on gas and oil, I knew
it would be hard and long, but I didn’t know what to expect,” he
The final recommendations of the Sheshinski Committee were released
on January 3.
According to those recommendations, the state’s share of
the net profit from the sale of oil and gas would increase from the current
one-third to between 52 percent and 62%.
The initial levy on the
companies will stand at 20%, and rise gradually to 50%, dependent on the amount
of excess profits, while the rate of royalties will remain at its current level
The decrease in profit margins sparked harsh criticism by both
energy companies and private investors, who complained that they deserve to
profit from the risks they take in investing in searches for gas and oil
Steinitz formed the Sheshinski Committee to reexamine
royalties and taxation for companies benefitting from Israel’s national
resources after major naturalgas deposits were discovered off of Israel’s
“When I asked Prof.
Sheshinski to lead it, I knew that it
was a not simple job, but I didn’t know what I was dragging you into,” Steinitz
said, referring to Sheshinski, who was sitting in the visitors’ gallery as his
recommendations passed into law.
He condemned character assaults launched
by opponents against Sheshinski and his family in the course of the debate
surrounding the recommendations.
Following a request from Prime Minister
Binyamin Netanyahu, a clause was added to the bill that would see the taxing of
gas companies linked to the regular company tax rate. Under the clause, the levy
imposed on the companies by the state will decrease as the company tax rate
increases, and vice versa.
Only two members of the National Union voted
against the law.
“The government failed to stand by its promise to the
public and to establish a welfare and education fund with the additional gas
revenues,” National Union MK Uri Ariel said. “The income will be lost within the
national budget, will be subject to the control of Treasury bureaucrats, and the
public will not receive anything.”
As part of the law, the government had
committed to establishing a fund that would set aside additional income for
special budgetary goals, with MKs pushing for the fund to be entirely devoted to
social and educational projects.
“The severe damage to investors will be
for nothing,” Ariel said on the plenum floor.
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