An Israeli government appointed panel has recommended a “windfall tax” on natural resources including potash and other raw materials from the Dead Sea. The panel issued its interim report May 18. The 42 percent surtax on excess profits would be levied on net profits above an 11 percent return on investment. Israel Chemicals Ltd. would be the hardest hit by the recommendations.
The committee also called for a uniform 5 percent royalty level. This would replace royalties on natural resources that currently range from 2-10 percent. The committee was appointed last year by Finance Minister Yair Lapid to reassess the tax regime on natural resources excluding oil and gas. The proposals would cost ICL an estimated $120 million in additional taxes annually. ICL shares fell on May 18 by 2 percent following the issuing of the interim report and shares of Israel Corp., the holding company which owns a majority stake in ICL, were down by 3 percent.
The interim report recommended that the new tax regime come into effect in 2017, and not when the legislative process is concluded by the Knesset. The report said this could give ICL time to adjust to the proposed changes. A final committee report is due out in a few months and this will be followed by government approval and then passage of a law by the Knesset.
In response to the recommendations ICL said it was freezing all planned investments in Israel totaling over $1 billion until the issue of increasing taxes on the company is resolved. ICL also said that the impact of the interim recommendations if implemented would be disastrous and lead the company to reduce its operations in Israel and lay off workers.