Government Mustn't Bow to Chemical Giant's Pressure

Israel must act to implement 'Sheshinski 2' recommendations, as well as to foster employment in Negev, which would reduce dependence of residents on Israel Chemicals.

Bloomberg

Following his struggle for approval of the natural gas outline, which voids some of the Sheshinski Committee’s recommendations regarding the taxation of natural gas, it seems that Prime Minister Benjamin Netanyahu has a similar fate in mind for the recommendations of the second Sheshinski Committee. That committee looked into government policies regarding taxation of natural resources, and its recommendations are particularly relevant for the Israel Chemicals company (ICL).

Two weeks after the cabinet committee for social and economic affairs approved the Sheshinski Committee’s recommendations ahead of their incorporation into the annual supplementary Economic Arrangements Law, Netanyahu, through the director general of his office and Likud ministers, is fighting to have ICL excluded from the law. That became clear during a meeting on Wednesday of a special legislative committee dealing with the Economic Arrangements Law.

Following arguments between representatives of the Prime Minister and the ministers of Finance and Economy, the committee determined that the recommendations of “Sheshinski 2” would be incorporated into the law, but a committee would be established for the purpose of amending those recommendations after the first reading in the Knesset. The wording of the compromise raises concerns that they will be shelved alongside other committee resolutions, such as those of the Locker or Alalouf committees.

The recommendations of “Sheshinski 2” included several clauses that would have increased taxes and royalties paid to the state by ICL and would have reduced some of the tax benefits the corporation enjoys. The key ones related to the exclusion of mining activities from the Law for the Encouragement of Capital Investments, the imposition of a tax on profits that exceed a given yield on capital, determination of a formula for setting a realistic price for translocating bromide between Israel Chemicals companies and more.

Ever since the recommendations were made public, ICL has been pressuring the government to shelve them. Among other threats, it warned that it would shut down some of its activities in the Negev, fire employees and halt its investments in the area. Workers’ committees also pressured Netanyahu to cancel these decisions in order to avoid job cuts. That, despite the fact that central elements of the recommendations will not affect the rate of employment in the company’s plants.

A company must be profitable in order to provide employment and contribute to developing the local economy. That said, the recommendations of a professional committee’s must be respected, especially after it set standards common in world markets and found that ICL has been paying lower taxes than were required for many years. There is no need for another committee to deal with the recommendations of a previous one. The government must act to implement the “Sheshinski 2” recommendations, as well as to foster employment in the region, which would reduce the dependence of Negev residents on Israel Chemicals.