THE DEAD SEA WORKS in Sdom, the world’s fourth largest producer and supplier of potash products, is owned by Israel Chemicals Ltd.
(photo credit: REUTERS)
MK Dov Henin (Hadash) on Sunday called on Prof. Eitan Sheshinski – who heads a committee to review natural resource taxation policies – to withstand pressure from Israel Chemicals to reduce royalty and tax rates.
The Sheshinski 2 Committee recommended in May that companies exploiting the country’s natural resources be charged a tax rate on all excess profits – known as a surtax – of 42 percent, stressing that such a tax would provide the state with NIS 500 million annually. In addition, committee members recommended setting a uniform royalty rate on natural resources of 5%, to remain consistent with global conditions.
After hearing the recommendations in May, Israel Chemicals responded by freezing an investment program worth more than $1 billion, protesting that the high taxes would reduce its competitive edge globally. At the time, the company said that such changes would necessitate cost-cutting and layoffs within the firm.
Two weeks ago, the company announced plans to close its magnesium factory in 2017. The factory employs 550 people – about 10% of the company’s total workforce.
The company also has plans to downsize its bromine plant, which employs another 1,200 people.
A day later, Israel Chemicals formed a cooperation with the Louisiana-based Albermarle Corporation for the production of flame retardants, based on bromine derivatives.
On Friday, Israel Chemicals announced the launch of an initial public offering on the New York Stock Exchange.
Henin sent the letter to Sheshinski on Sunday following a report in Yediot Aharanot that morning indicating that the committee may be caving to pressure of Israel Chemicals to significantly reduce its required royalties.
“We must reject out of hand the shameless threats of the company to reduce its activities in Israel or close factories,” Henin wrote.
Henin discouraged Sheshinski from surrendering to what he described as the “emerging trend to succumb to the pressure of Israel Chemicals.”
Reminding Sheshinski that the 2013 net profit of Israel Chemicals stood at $819m., Henin stressed that only recently the company approved the dividends of about half a million shekels to shareholders. The Knesset member accused the company of emphasizing its exclusivity on Dead Sea resources, which he said has given Israel Chemicals a competitive advantage around the world.
“Israel Chemicals has no option to take the Dead Sea with it on a plane, if the company decides to leave Israel,” Henin wrote.
Rather than merely imposing a surtax on the company’s excess profits, Henin recommended increasing royalties collected on resource development as well. He particularly pointed out that after various deductions, the royalty rate on phosphate mining currently only stands at 0.8%.
“Our starting point must be completely different. Natural resources belong to the Israeli public,” Henin said. “Even if a private party has the right to develop them, we must ensure that the profits will be overwhelmingly in the public purse.”
Like Henin, representatives of Adam Teva V’Din and the Movement for Quality Government also sent letters to Sheshinski on Sunday. The organizations demanded not only that committee members refrain from caving in to pressure, but also that they expand and adapt their recommendations further in accordance with public opinion.
In response to Henin’s letter, Israel Chemicals slammed the Knesset member for disregarding the workers who might be hurt by an increase in taxation on the company.
“It is bizarre that specifically a Knesset members associated with safeguarding the rights of workers would ignore the significant harm to workers and their livelihoods, which the recommendations of the committee would impose on the Negev,” a statement from Israel Chemicals said.Niv Elis contributed to this report.