Several hours after the announcement by the Ministry of Finance that it is setting up a second Sheshinski Committee to examine royalties on all the country's natural resources, Israel Chemicals Ltd. (TASE: ICL) has already slammed the move and implied that Prof. Eytan Sheshinski, who also chaired the committee which examined oil and gas royalties, is not impartial.
The company said, "Israel Chemicals welcomes the creation of the committee that was established today by Minister of Finance Yair Lapid to examine the State’s revenues from natural resources The company believes and hopes that this committee, and all its members, will review professionally and seriously all the facts, data, and current commitments relating to the issue, and will examine what is good for the State of Israel, including local communities, which are liable to be affected by these decisions, the general public, Israel Chemicals employees and business partners, as well as the company's shareholders in Israel and overseas."
The company's barbs appear in the second paragraph, where it says, "In this regard, we regret that Prof. Sheshinski has already expressed his opinion on the matter, even after the finance minister spoke with him, in a way that harms the appearance of a purposeful and professional examination of the subjects, and presents incorrect and unchecked facts and figures."
Israel Chemicals goes on to state, "Israel Chemicals will cooperate with the committee and will provide it with all relevant information in the company's possession, exactly as it has done in the past. Israel Chemicals will also present the consequences of various solutions and proposals, for example about negotiations on doubling royalties and the financing of the national project to save the Dead Sea hotels, which concluded with the agreement signed a year. This agreement is intended to create stability and a long-term planning horizon for Israel Chemicals and its employees for the coming years. Israel Chemicals is pleased to see that this agreement received prominence in the announcement about the establishment of the committee, and it expects that this agreement will be honored by all the parties in word and spirit, which will also indicate the degree of trust in Israel by the global economy.
"Following various actions taken by the government and the Knesset, including the agreement to double royalties paid by Dead Sea Works for potash mining at the Dead Sea, and following the exclusion of Israel Chemicals from the Law for the Encouragement of Capital Investments, Israel Chemicals already pays the highest taxes in Israel, amounting to NIS 1 billion a year. Israel Chemicals' taxes to the government include royalties on pretax profits, the companies tax, and the dividends tax, which already amount to 41% of the pretax profit. Under the current structure, the government's take from potash production at the Dead Sea will grow to 59% of the pretax profit within a few years, the highest government take in the industry. Israel Chemicals believes that there is no need and no reason to continue raising the government take in the future."
Earlier today, Psagot Investment House Ltd. cut its recommendation for Israel Chemicals to "Hold" and cut its target price from NIS 47 to NIS 44, citing the rise in the company's risk premium and the lack of positive developments in the company's business environment.
Published by Globes [online], Israel business news - www.globes-online.com - on June 17, 2013
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