Analysis

The Case of the Vanishing Natural Gas Tax Windfall

Why has the PM suddenly slashed the amount of money Israel will receive from hundreds to tens of billions?

Off Haifa coast, oil rig at enormous Leviathan natural gas field.
The navy reasons that it will have to protect oil rigs, such as this one at in the enormous Leviathan natural gas field off the Haifa coast. Albatross

On the eve of Rosh Hashanah, and evidently in an ebullient mood, Prime Minister Benjamin Netanyahu published a list of 14 of his government’s economic achievements on his Facebook page. (Over at the Finance Ministry, they noticed that the name of Finance Minister Moshe Kahlon, who is responsible for most of these moves, gets nary a mention.)

Readers might accredit something else entirely for some of the steps – the social-justice protests that began in 2011, which provided backing for reforms on behalf of the greater public at the expense of the interest groups. They might also notice that some of the moves are still just starting and might never lead to real reductions in the cost of living, or just move monopolistic rents from one interest group to another.

Our interest was piqued by one specific item toward the end of the list. Here is the list: the keen of eye and memory will note the prime minister’s little addition to the particular item.

* We lowered taxes to encourage economic growth and relieve Israeli citizens – and we lowered VAT and corporate tax

* We lowered import taxes and led the “cornflakes reform” to lower food product prices

* We opened the dairy products market to imports, to lower dairy prices

* We lowered the price of traveling by public transportation

* We encouraged the ultra-Orthodox and Arab communities to go out to work

* We instituted a government plan to strengthen small businesses

* We expanded free dental care for children up to age 14

* We increased income supplement allowances for the elderly and encouraged their integration in the labor market

* We raised the minimum wage

* We instituted a “savings for every child” program

* We lowered electricity and water tariffs

* We passed the natural gas plan, which is bringing tens of billions [of shekels] into the economy – for welfare, education and health care for the Israeli public

* We opened new markets and trade agreements with China, Japan, India and many other countries

* We encouraged investments in the cyber [industry] and turned Israel into a global cyber superpower that receives 20% of private global investments in the field.

Slip of the keyboard

I refer, of course, to the third item from the end – the “natural gas plan, which is bringing tens of billions into the economy.” Bringing? Of course, Netanyahu means “will bring,” since royalties from the natural gas found in Israeli territorial waters on the Mediterranean seabed are still picayune, though more should arrive in the years to come.

And “tens of billions”? Wait, did Netanyahu make a slip of the keyboard? In the last two years, while Netanyahu fought to allow the natural gas explorers to preserve their monopolistic status (without fear of competition or price controls), to exempt them from investment in energy security and allow them to export more of the gas, he consistently claimed that the policy would bring “hundreds of billions.”

We always felt that figure to be excessive, completely unrealistic. In any case, Netanyahu and his energy minister, Yuval Steinitz, managed to turn the natural gas plan issue into a left-right issue, garnered support and forced the government watchdogs to approve it.

Was it a mere typo or, moments before Yom Kippur, did they decide over at the Prime Minister’s Office that it was an appropriate time to climb down from the tree of hundreds of billions and start to converge on realistic figures?