For five years Israel has been trying to increase its share of revenue from the Dead Sea’s resources, owned by Israel Chemicals. This is not an effort to punish a private company or nationalize natural resources, which were privatized two decades ago in a fair and transparent procedure. It is just an attempt to increase the public’s share in the enormous profits of a key natural resource, and to exercise the right of the state, whose budgetary needs are many, to split the burden fairly among its citizens.
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One such attempt came in 2011, when the Haim Shani Committee decided o exclude Israel Chemicals’ potash factory from the Encouragement of Capital Investments Law’s tax benefits. The committee ruled that there is no point in incentivizing natural resources, which cannot leave Israel’s borders, with tax breaks.
The state outdid itself in 2014, when the Sheshinski 2 Committee decided that Israel Chemicals was enjoying excessive profits, and that the state’s share of its revenue should increase to 42 percent. The committee’s conclusions were published after hearings, and after listening well to Israel Chemicals’ complaint that the state was continuously burdening the company.
Important governmental committees made the decision about these steps, after careful consideration and balance between interests. Therefore, it is disappointing to discover that the Economy Ministry, which was an active partner throughout every stage of these decisions and never opposed them, has suddenly changed its tune.
Amit Lang, director general of the ministry, issued an opinion paper two months ago effectively undermining the state’s taxation policy regarding natural resources since 2011 (See Meirav Arlosoroff, Page 6).
According to the report, Israel Chemicals is correct in its claims against the tax authority, and there is no place for denying it the tax benefit according to the Encouragement of Capital Investments Law. As a result, the state’s share of Israel Chemicals’ profits will be less than 42 percent.
The Economy Ministry’s sudden change in position is infuriating and disappointing. It ignored all the work of the governmental staff of the past five years. Without any attempt to settle contradictory positions within the government, the ministry provided Israel Chemicals with free legal ammunition, and torpedoed a process that the government prepared intelligently and responsibly and was meant to serve the public.
Despite the Economy Ministry’s position, it would be appropriate for the government to amend the application of the Encouragement of Capital Investments Law as the Shani Committee recommended, and allow the potash factory to be taxed at the corporate rate in keeping with the decision of the Sheshinski 2 Committee. There is no reason for Israel’s largest and most important natural resource to bring the Israeli public so little tax revenue.