He's Just an Evil Tycoon

That's why anyone who goes after the tycoons wins public support. That's why Tshuva is the bad guy in this story, no matter how many public relations agents he hires.

Nothing's easier than to write a popular article on the natural gas issue. You merely have to write that not only is the Sheshinski Committee right, but it should have raised taxes on Yitzhak Tshuva further, because this gas belongs to us, not to some evil tycoon who discovered it in the depths of the sea.

This is because most people here hate the rich, hate people who succeed and hate business people. They would like to see them lose their fortunes, become penniless and stand in line at the employment office. That's why anyone who goes after the tycoons wins public support. That's why Tshuva is the bad guy in this story, no matter how many public relations agents he hires.

For us, the rich are not merely people with money. They are "tycoons," a derogatory term for a wealthy man who made his fortune not through hard work and risks that most people are unwilling to take, but through access to politicians and favors from them. Since it's inconceivable that someone got rich honestly, he must have been corrupt.

Yesterday I asked a friend who supports a sharp increase in tax on gas discoveries what would happen if as a result investors don't come here and the gas stays in the earth. "So they won't come and there won't be gas," he retorted scornfully. He's ready to cut his nose off despite his face so Tshuva and his cronies are tarred and feathered in the town square.

The members of the Sheshinski Committee found an easy way out of confronting the tycoon directly. They simply refused to summon him to the panel, neither him nor any expert or professional from this complex industry - as if they knew everything and no one's capable of teaching them anything. They, people in the public sector, never took a risk, never sold or stole a horse, but they can arrogantly say that no investor will run away, that there's no danger that Noble Energy will withdraw, and that the gas from the Tamar field will arrive on time. If none of this happens, not a hair will fall from their heads.

The committee built the right model. It didn't touch the "royalty charges" (12.5 percent ) but canceled the "depletion deduction" and levied a "designated tax" on the industry. The problem is that the committee went too far; the result is that instead of the state receiving 30 percent of the revenues of profitable drilling ventures, it will receive 66 percent, and that's an unfair distribution of the receipts that calls into question the feasibility of further gas exploration in the Mediterranean.

It should be understood that until Tshuva found gas, 500 drilling attempts found nothing. And who paid for them? The investors who lost out. It's a high-risk industry, with drilling four to five kilometers deep in the middle of the Mediterranean, with investments of billions of dollars in complicated projects. When the risks are high and the chances of a total loss are great, investors demand a high return when they succeed. If not, they won't invest.

It's absurd to compare Israel to Britain, Norway or the United States in this matter. The risks are far smaller there. The gas and oil fields are known there, and infrastructure for transport to the coast is in place. There is no problem there of an Arab boycott and no war risk that requires Israel to offer better conditions than the rest of the world.

Another issue that needs to be corrected is the retroactivity, because when Tshuva took an exceptional risk and drilled into the depths of the sea, he knew he would pay tax of 30 percent. Those were the terms under which he planned the investment, raised money from banks and got Noble Energy to come here. And those were the conditions under which the provident and pension funds bought participation certificates, as did investors from the public. How can we say now, "Oops, we were wrong. Now, after you've made a discovery, we'll double your tax level. Because what can you do to us? We're the powerful state that is always right, and you're just an evil tycoon whom everyone hates."

It's also clear that changing the terms of the contract after gas has been discovered sends the world a message that Israel is not a serious and stable country that is true to its word. That harms investment and growth in the long term. But I had wanted to write a popular article that would be applauded by the bloggers, and it came out entirely different.