The sovereign wealth fund that is meant to accumulate billions of shekels for the welfare of Israeli citizens from taxation of the super-profits of the Israel gas reservoirs will start to operate only in 2022, and not during 2021 as planned.
This is because the amount collected in this form of taxation has not yet reached the threshold for starting the fund - NIS 1 billion. So far, the Israel Tax Authority has collected just NIS 741 million. The Tax Authority expects collection to cross the NIS 1 billion threshold by the end of this year, but it will be possible to operate the fund only in 2022.
This is a further postponement from the original date set for the wealth fund to begin to operate, which was in 2018. The start of the fund has been put back several times, because of lower than expected revenue from some of the gas reservoirs.
The Israel Citizens' Fund is meant to accumulate all the state's revenues from the tax on super-profits of the gas reservoir since 2011 (Sheshinsky Committee 1), and the revenues from the super-profits tax imposed in extraction of natural resources since 2015, such as potash, bromine, magnesium, and phosphates (Sheshinsky Committee 2).
For the first time, the Israel Tax Authority published official figures today on tax collection under the Law for Taxation of Profits from Natural Resources and a forecast for collection in the coming years. Between 2011 and 2020, a total of NIS 486 million was collected from the gas reservoirs, and a further NIS 225 million was collected in the first half of 2021. The tax under the law is in addition to companies tax collected by the Tax Authority, royalties on oil and gas collected by the Ministry of Energy, and royalties on natural resources collected by the Accountant General in the Ministry of Finance.
The Israel Citizens' Fund set up by the Sovereign Wealth Law of 2014 will manage the additional tax revenues once they surpass NIS 1 billion. One year from the start of its operation, the fund will be able to distribute 3.5% of its annual revenue for social, economic and educational purposes in accordance with proposals by the government, subject to approval by the fund's institutions, headed by its council.
The Tax Authority estimates that total revenues in nominal terms from the levy on oil and gas profits (without the levy on profits from other natural resources) will amount to just NIS 44-53 billion between 2021 and 2064. This is considerably below previous forecasts, which the Tax Authority attributes to a fall in the price of natural gas and the expectation that prices will continue to fall.
Published by Globes, Israel business news - en.globes.co.il - on July 5, 2021
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