Israel Mulls Oil And Gas Royalties Regime

By Editorial 12 August, 2010

In April this year, the Israeli finance minister, Yuval Steinitz, set up a committee under Professor Eitan Sheshinski of Hebrew University to recommend policy including taxation on gas and oil finds, and to research the effects these may have on the Israeli economy. Debate is hotting up.

The committee will receive public submissions until August 15 and submit an interim report in mid-September with final conclusions by the end of October. There are many tax issues which need to be addressed by the Committee, but since the discovery of gas off the Israeli Mediterranean coast, the question of whether the existing 12.5% royalties rate on Israel’s natural resources should be raised is the hottest topic.

The Tamar gas field, 50 miles off the Haifa coast, was last year estimated to be the world’s largest find in 18 months with a net present value assessed at USD8bn.

The oil and gas industry itself is always in favour of tax stability and predictability and would choose the same royalty rate on which they based their investment; but others may argue that a rise would make the royalty more comparable with those charged elsewhere. A decision is needed soon.

Already Noble Energy, a partner in the Tamar project, is being forced to wait and see the result of the Sheshinski deliberations before announcing future plans. CEO Charles Davidson cancelled several interviews with the Israeli media at the last minute after a series of ministerial meetings, including with the finance minister, failed to give him the answers he needed on taxation.

Other tax issues that may need resolution by the committee were listed by the Jerusalem Post and included depreciation, tax treaties (permanent establishment rules), withholding taxes and expatriate workforce terms.

Tags: Expatriates | Tax | Double Tax Agreement (DTA) | Royalties | Israel | Oil And Gas | Withholding Tax | Tax Breaks |


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