Cabinet Approves Sheshinski Committee Recommendations

In practice, the recommendations will mean a large tax increase on the profits of such companies as those in oil and natural gas exploration and production.

The cabinet yesterday approved by a large majority the recommendations of the Sheshinski committee on fiscal and tax policy on Israel's natural resources. In practice, the recommendations will mean a large tax increase on the profits of such companies as those in oil and natural gas exploration and production. They were also accompanied by a great deal of controversy, opposition, political pressure and lobbying against them.

Prof. Eytan Sheshinski, the economist who headed the committee, filed a complaint with the police a few weeks ago, in which he claimed that his telephone conversations were being listened to and that he had received threatening letters. He said both his home and cellular phones were being tapped. (See more coverage on Page 1. )

Sheshinski and the Finance Ministry both refused to comment.

The cabinet approved the committee's recommendations yesterday by a large majority, with 21 ministers voting in favor and five opposed. Additionally, the cabinet voted to accept them as is, without any changes.

Prof. Eytan Sheshinski
Tomer Appelbaum

Specifically, the Sheshinski committee recommended that the taxes on oil and gas companies' profits be increased from the current rate of 33% to a figure that would range between 52% and 62%.

Ministers from the Likud, Shas and Atzmaut parties voted in favor of the committee's proposal, while National Infrastructure Minister Uzi Landau and the other ministers from Yisrael Beiteinu voted against it.

Likud Minister without Portfolio Yossi Peled abstained from the vote due to his previous business partnership with Yitzhak Tshuva, one of the owners of drilling rights for an underwater natural gas field in Israeli territorial waters.

Finance Minister Yuval Steinitz, who led the efforts to convince the cabinet to adopt the committee's suggestions said: "Today, the cabinet will put an end to the disgraceful situation in which the citizens of Israel do not benefit from the country's natural resources, as do the citizens of other developed nations.

"Today, the cabinet sent a clear message to everyone who thinks the wealthy and powerful affect its decision-making process," Steinitz added.

The proposed changes will now have to be approved by the Knesset to become laws, and sources expect them to pass by the end of March before the Knesset recesses for the Passover holiday. The Ministerial Committee for Legislation will first have to approve the specific bills, including the Sheshinski committee recommendations, and a vote is expected on February 13. Then the proposed changes will go to the Knesset.

The gas and oil company lobbyists are now expected to concentrate their efforts on the ministers and MKs, in an attempt to lower the new tax rates.

Sheshinski criticized the lobbyists yesterday, saying they interfered with his committee's activities.

"When 10 lobbyists are sitting on a Knesset committee alongside two MKs, it interferes with the proper implementation of the separation of powers," he said in an interview with the Knesset television channel.

The Knesset has yet to decide where the Sheshinski recommendations will be discussed, possibly in a joint panel of the Finance and Economic Affairs committees - or perhaps they will be split between the two committees.