Socialist Demands Would Turn Israel Into a Second Venezuela

The tax burden proposed by MKs from the left would turn Israel into a failed socialist dream, like Chavez's legacy in Venezuela.

Ofer Vaknin

Israel’s media scene is super professional. It has no agenda and is entirely objective. Its coverage of the recommendations of the Sheshinski 2 panel, an official committee that recommended increasing the royalties paid by companies that exploit Israel’s natural resources, included headlines such as: “Israel Chemicals gets 100 million shekel gift,” “Concessions to Israel Chemicals,” “Writing Israel Chemicals a check,” “Israel Chemicals wins” and other similar sentiments.

Who cares that the Sheshinski committee actually recommended increasing the annual tax burden of Israel Chemicals (ICL) by 400 million shekels ($107 million)? Why let the facts get in the way? The media recalled that the Sheshinski panel, headed by former Hebrew University professor Eytan Sheshinski, had initially wanted to impose 500 million in new taxes on Israel Chemicals but ultimately decided on 400 million. So it concluded that the panel was handing Israel Chemicals a 100 million shekel gift? Journalism at its best.

Labor Party Knesset member Shelly Yacimovich immediately complained that the tax rate recommended by the Sheshinski panel was too low, even though it’s among the highest in the world. She also cruelly took the director general of the Economy Ministry to task, and he cannot respond. MK Dov Khenin, whose Hadash faction was initially established by the Communist Party, also rushed to demand that the royalty rate be sharply hiked, because that’s what is required by an ideology that is repulsed by the success of private enterprise.

The pair of Knesset members were also harsh critics of an earlier public panel headed by Prof. Sheshinski that recommended increasing royalties paid on the country’s natural gas resources. They wanted the gas companies to be taxed to such an extent that it would have effectively meant nationalizing the gas reserves.

Are they aware that following the Sheshinski gas tax hike, drilling for natural gas and oil off Israel’s coast stopped entirely? And that even Noble Energy, the American company that is the Delek Group’s partner in the Tamar and Leviathan offshore fields, went looking for gas in West Africa?

Out of total ignorance, Yacimovich says that ICL has not created or developed a thing. But in fact she is wrong. Here’s just one example. At the beginning of the 1990s, then-government-owned ICL produced 2.2 million tons of potash from the Dead Sea. Now privately-owned, ICL today produces 3.5 tons from the very same site. That’s nothing?

ICL also currently directly employs 5,000 people in Israel and is indirectly responsible for providing work to thousands of others. These are workers who earn good wages and constitute the backbone of communities in the south, such as Arad, Dimona and the entire Negev region. What’s bad about that? Isn’t it better to have more employees like those at ICL, rather than having them lose their jobs, as happened at Arad Towels?

Yacimovich derisively says that they can’t take the Dead Sea away from Israel and therefore we shouldn’t get too excited about ICL’s threats. But ICL can take its investment capital elsewhere. It can decide to invest abroad, rather than in Israel, based on considerations of profitability. It already has facilities in Britain, Spain, Germany and the United States, and it is looking into investing in Ethiopia, Vietnam and China. What will we do if the company prefers to invest abroad rather than increasing its investment in its Dead Sea phosphate mining operations here?

Over the course of an entire year, Sheshinski studied the issues, including the concern that an excessive tax burden could hurt investment and employment in the south. He didn’t want Israel to sink to the level of the country of Yacimovich’s and Khenin’s dreams—Venezuela.

In Venezuela, the approach favored by the two Knesset members has been implemented to the letter. Late President Hugo Chavez pursued a socialist ideology that made his country poor and forlorn. He nationalized the oil industry (because oil belonged to the Venezuelan people), nationalized some food manufacturers (because the government knew how to run businesses better), imposed price controls on a large number of products and boosted government spending. Precisely as Yacimovich and Khenin dream happen in Israel.

The result was that investors fled Venezuela, unemployment increased and inflation reached a global high of 60%. Poverty spread and there were permanent shortages of food and medicine. The black-market dollar shot up in price and a million Venezuelans fled the country. Supermarkets in Venezuela take customers’ fingerprints to check whether they bought staple items the day before, heaven forbid.

That’s how it is with socialism and that’s what Yacimovich and Khenin want to bring us to. There’s nothing like Venezuela!