Knesset approves Sheshinski conclusions in 1st reading

Steinitz tells MKs that income from taxation of gas resources will provide billions of shekels for education, welfare, national strength.

By REBECCA ANNA STOIL
February 28, 2011 22:20
3 minute read.
Eytan Sheshinski and Yuval Steinitz.

Sheshinski and Steinitz 311 . (photo credit: Marc Israel Sellem)

With broad-based support among both coalition and opposition members, the Sheshinsky Commission’s recommendations sailed through their first Knesset reading by a vote of 38 to eight Monday night.

The controversial recommendations, which opponents claim could dissuade potential investors in Israel’s natural resources, will now be prepared for their second and third readings in the Finance Committee.

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“Israel currently holds the lowest place in the world in terms of taxation of gas resources,” Finance Minister Yuval Steinitz told MKs, explaining why they should join the government in supporting the legislation.

“Other than the regular corporate tax, the state receives no additional benefit other than the fact that the energy companies use Israel’s natural resources.”

Steinitz said most Western states that discover oil raise their taxes, adding that the “average percentage of a state’s take is around 60 percent, while Israel will receive 50%-60% on average.”

He went on to assure MKs that “this income will become significant around 2015 or 2020 – and will be important for the state,” calling the hundreds of billions of shekels “a massive sum that can serve education, welfare, national strength and the entire Zionist effort. We are doing something from which we and our children will benefit, and there is no disproportionate harm to investors.”

Earlier in the day, the Likud Knesset faction received a pep talk in support of the government- sponsored legislation from Prime Minister Binyamin Netanyahu and Prof. Eitan Sheshinsky, who headed the commission.

“We ask today to pass the recommendations issued by Prof. Sheshinsky – it is essential to the realization of Israel’s natural gas resources, and the faster we move, the better,” the prime minister told his MKs. “I ask faction members to unify and pass the bill through its first reading, after which we will make a great effort to pass it through its second and third readings. It is part of the process of creating energy sources for the state of Israel, which is always important, and especially so at this time.”

But while Netanyahu called for faction – and coalition – unity, Israel Beiteinu MKs voted against the Sheshinsky Commission’s recommendations.

National Infrastructures Minister Uzi Landau has consistently opposed the committee’s findings, arguing that increasing taxation for gas companies will dissuade future investors from developing Israel’s natural resources. On the opposite side of the aisle, Labor and Meretz MKs promised to support the government’s efforts throughout the legislative process.

Among the committee’s recommendations is an increase in government oil and gas profit revenues from approximately 33% today to over 50%. The vote on Monday approved the majority of the recommendations, but coalition officials said some would be issued as protocols and guidelines rather than passing through the legislative process.

Although the bill is expected to advance smoothly with government support, its immediate future is still uncertain. There is a difference of opinion within the Knesset as to whether the legislation should be referred to the Economic Affairs Committee or the Finance Committee; therefore, its next stop is the House Committee, where MKs will decide where the bill will be prepared for its final readings.

Coalition Chairman Ze’ev Elkin (Likud) said that Knesset legal advisor Eyal Inon had ruled that the Finance Committee was the most appropriate destination for the bill, but added that the coalition would seek to find a compromise that satisfies all parties.

One likely outcome – should Finance Committee chairman Moshe Gafni (UTJ) be willing – is to form a joint committee of the two committees under Gafni’s leadership.

House Committee chairman Yariv Levin (Likud) said Monday that he, too, was interested in finding a fair and balanced solution to the question that would satisfy those concerned about investors’ rights as well those who want to ensure the state reaps the financial benefits of its natural resources.

Levin added that he believed the legislation must be prepared with a finger on Israel’s strategic pulse, taking into consideration the geopolitical situation. Israel currently receives much of its natural gas through a pipeline that originates in Egypt, and which has been threatened by the political turmoil taking place inside Israel’s southwestern neighbor.


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