This afternoon, the Knesset passed into law the recommendations of the Sheshinski committee on taxation of oil and gas discoveries in Israel. The law raises the state's take from profits on oil and gas discoveries to 52-62%, compared with the current 30%.
The bill passed by a majority of 78 to two. At the end of the vote, MK Shelly Yacimovich (Labor) shook Prime Minister Benjamin Netanyahu's hand.
"Not every day do left and right, religious and secular, opposition and coalition unite," said Minister of Finance Yuval Steinitz after the law was passed. "I knew that it would be tough, I knew that it would be a long, drawn-out process, but I didn't know how much. This law means that we will all benefit from our natural resources. That is just and right."
The new law provides that royalties on hydrocarbon discoveries will remain at 12.5%, while taxation of profits will begin only after the developers have reached payback on their investment plus a return. The levy will be 20% after a payback of 150% on the investment, and will rise gradually, reaching 50% after a return of 230% on the investment. The maximum take by the state will therefore be 62.5% - royalties plus the levy.
The most important change to the original recommendations of the Sheshinski committee is that the law mandates the setting up of a fund to which taxes collected under it will be transferred. The fund will be used for social and economic purposes. Another change is that any change in the rate of companies tax will trigger a corresponding change in the levy.
Published by Globes [online], Israel business news - www.globes-online.com - on March 30, 2011
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