Tax Authority: Israel Chemicals Pays Only 18% of Profits to State

ICL has said its tax bill amounts to 41% of profits and is set to rise to 59%.

The state received just 18% of Israel Chemicals' pretax profits in 2011, the Tax Authority on Sunday told a Knesset committee that is reviewing royalty payments on natural resources, according to sources close to the panel.

That percentage is a fraction of the 41% figure the company cites - but the two are using different measures, and apparently tax figures from different times too. A large  part of the difference is that ICL is including dividend tax it pays, while the state isn't factoring in that figure.

The Director General of the Tax Authority, Moshe Asher, testified on Sunday before the Sheshinski Committee about the tax obligations of companies that extract minerals in the quarrying and chemical industries. According to the sources, who did not want to be identified, the state receives a larger share in terms of corporate income tax and royalties on pre-tax profits from the quarrying industry than the chemicals industry. The calculations were based on the reported 2011 accounting profits of chemical industry companies, ICL foremost among them.

ICL recently claimed that 41% of its profits are paid to the state and that this figure would rise to 59% in the coming years as part of the planned hike in the corporate income tax rate. However, ICL's figure included the tax on dividends, which the state did not recognize as relevant to the issue of royalty payments.

During the committee session, the Tax Authority representatives also justified the lack of royalty payments by water bottlers Neviot, Ein Gedi and Mey Eden. According to the authority, if the state charged these companies royalties it would also assume responsibility for providing alternative water sources for the bottlers if needed. Committee members rejected this argument.

In previous committee sessions the Environmental Protection Ministry has demanded that ICL subsidiary Dead Sea Works pay tens of millions of shekels in royalties for the water it pumps from the Dead Sea for potash production and other uses. The company does not pay for this water despite the fact that according to the ministry it annually pumps as much from the Dead Sea as is drawn from Lake Kinneret each year.

"The state sold the concession to produce minerals from the Dead Sea for close to $1 billion," ICL said in response to the water proposal. "As part of the concession law, the company has specific rights that were intended to enable it to work the concession, including pumping water from the Dead Sea." The company added that it paid some of the highest annual royalties in the world and that in 2012 it paid NIS 400 million in royalties to the government, the most by any company in Israel.

Reuters