Israel Beiteinu, the party of Minister of Foreign Affairs Avigdor Liberman, is demanding a reduction in the maximum tax rate on natural gas discoveries, recognition of financing expenses for tax purposes, and an income stability clause as its conditions for supporting the Sheshinski bill in the Knesset Finance Committee. The party has two members on the committee: MK Fania Kirshenbaum and MK Lia Shemtov.
Kirshenbaum claims that the figure for the maximum tax rate "is open to negotiation". However, sources inform ''Globes'' that Israel Beiteinu is demanding a 45% tax rate on shallow discoveries and 40% on deep water discoveries. "I am afraid that raising the tax rate will fall, at least in part, on the shoulders of the Israeli consumer. We must therefore be very careful about the pace of the tax hike," she told "Globes". "Obviously, the companies can absorb part of the tax hike, but the other part, because of commitments and the high financing costs, will have to be passed on to the consumer."
The demand for income stability effectively means that it will not be possible to subsequently change the tax rate set in the Sheshinski bill after it is passed. "I believe that the stability value is critical, including the economic issue like taxes," said Kirshenbaum. "It is impossible to leave the law open to repeated changes. If we agree on the wording of the law after all the tumult that the bill has caused, then at least don’t make more changes in the future."
The Sheshinski bill proposes to recognize financing and hedging expenses for tax purposes up to a normative amount to be set by the Israel Tax Authority, not on the basis of actual expenses for experts (geologists and operators). Israel Beiteinu's proposal will reduce the final tax rate.
Asked about the chances that the Finance Committee will pass Israel Beiteinu's demands, Kirshenbaum replied, "I'm optimistic."
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2011
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