Israel’s socioeconomic cabinet on Monday unanimously approved a proposal to sharply increase taxes on companies exploiting the country’s natural resources, saying government coffers would expand by about 400 million shekels ($106 million) a year.
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In a final report issued last month, a government-appointed committee recommended a tax of 25% after companies reach an annual return on investment of 14%, rising to 42% for a return above 20%.
Israel’s government currently takes in about 23% in taxation from mining companies, but that would ultimately rise to between 46% and 55%.
These proposals don’t apply to natural gas and oil, so the biggest company by far to be affected by them is Israel Chemicals, which extracts potash and other minerals from the Dead Sea.
People who took part in the discussion said ministers approved small changes to the plan, which still needs Knesset approval. The most important change would let ICL deduct research-and-development costs against its windfall profit tax.
“We do not want to harm plants but rather ensure ... that the money does not stay with the wealthy few but is returned to the public,” said Finance Minister Yair Lapid, the head of the socioeconomic cabinet.
The tax hike drew ICL’s ire, but the stock fell only 0.7% in Tel Aviv on Monday to end at 26.22 shekels. The share had already dropped sharply over the last few months on expectations that the government would approve a revised plan for the so-called Sheshinski proposals, named after the government-appointed committee.
ICL has said it will cancel planned investments worth 2.5 billion shekels, reevaluate another 3.5 billion, divert investment to other parts of the world, close its magnesium plant and accelerate efficiency plans at its factories in the Negev.
To show its displeasure with the Sheshinski recommendations, ICL said this week its board would meet Tuesday in Catalonia to discuss plans to invest between 900 million and 1.2 billion shekels to expand output at the company’s Suria, Spain potash mine to 1.2 million tons annually. It would also upgrade infrastructure, including a railroad to connect the facility with a nearby port.
The board will also discuss the possibility of opening another mine at Suria to add another 1 million tons of capacity as well as expanding capacity at its adjacent plant to produce vacuum salt and white potash for the food industry.
The moves are part of ICL’s wider strategy to redirect investment away from Israel toward a growing portfolio of sites overseas.
Ahead of the vote, the Manufacturers Association urged the socioeconomic cabinet, which is smaller than the main cabinet but includes the finance and economy ministers, to reject the panel’s recommendations.
“They will almost certainly halt investments and reduce industrial activity in the Negev,” said Zvika Oren, the president of the organization, adding that the proposals must be examined further. “This is to prevent any possible damage to industry and jobs in the [southern] region.”