Israel Approves Doubling Oil & Gas Taxes
January 31, 2011 by sspillman
Israel Approves Doubling of Taxes on Oil and Gas Extraction Profits
New York Times By ETHAN BRONNER
Published: January 23, 2011
- JERUSALEM — The Israeli government on Sunday approved a near doubling of the profit tax on gas and oil extracted from its territory, a move of considerable significance in the wake of recent offshore gas discoveries expected to be worth tens of billions of dollars.
The cabinet voted overwhelmingly to accept the recommendations of a government committee to tax energy profits between 52 and 62 percent and to set aside a special fund from the income aimed at a range of public needs.
“I intend to establish a fund for Israel’s future that will be devoted to education and security,” Prime Minister Benjamin Netanyahu said at the cabinet meeting. Parliamentary approval is considered a certainty, but debate will doubtless occur on the priorities of the new fund.
In the past few years, about 25 trillion cubic feet of natural gas have been discovered off Israel’s northern shore, enough to turn it from a vulnerable energy importer into a robust exporter. In recent weeks, exploration companies have announced a 20 percent likelihood of there being four billion barrels of oil under the gas, which could prove still more significant.
The companies, along with some conservative political forces, have fought hard against any increase in the profit tax, saying that the cost of exploration is so high that the rate will endanger the viability of the enterprise.
But Eytan Sheshinski, a Hebrew University economist who led the government committee that recommended the increase, said the new rate was slightly below the average of the Organization for Economic Cooperation and Development, a group of more than 30 countries that Israel recently joined.
“We often chide ourselves in Israel that our policy-making decisions lack real planning,” Mr. Sheshinski said in a telephone interview. “Yet here was a process in which the committee sat for nine months, taking testimony that added up to thousands of pages. This was a real process of which we can all be proud.”
Finance Minister Yuval Steinitz said after the cabinet vote, “Today the government will put an end to the disgrace in which the citizens of Israel do not benefit from the country’s natural resources, as do the citizens of other developed nations.”