Israel's potential revenue from its natural gas reserves currently stand at $16 billion, according to a Knesset research paper prepared ahead of the discussion on amending the Israel Petroleum Law (5712-1952) proposed by MK Carmel Shama (Likud). Shama proposes raising royalties on gas and oil sales to 16% from the current 12.5% and to apply the Tenders Law on the process of awarding oil and gas exploration licenses.
The study found that currently Israel's total tax rate on oil and gas producers is 40%, or $16 billion of Israel's estimated $40 billion of natural gas reserves. The tax rate comprises direct taxes, such as the 15% corporate income tax, and indirect taxes, such as the 16% VAT, as well as 9% net royalties and 2.1% excise.
The researchers, Tamir Agmon and Yehudah Tamar, said, "The figures collated indicate that other governments' share is higher than 40%, and in fact only in the UK is the government's share of gas and oil revenue less than 40%."
They add, "The picture that emerges from all the taxes, fees, and levies indicates that the Israeli government's share of gas and oil revenue is similar to the share of the UK government's and substantially less than the share of the Norwegian government and developed oil producing countries. It seems that this is due to the Israeli legislature's wish to encourage investment in oil exploration, especially in the past, before the offshore gas discoveries, when oil exploration was considered as having fairly low potential. It seems that in other countries, taxes reflect the reality of the recognition of energy reserves and that there is no more need to give special encouragement to investment in exploration."
Published by Globes [online], Israel business news - www.globes-online.com - on May 23, 2010
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