Israel Chemicals Ltd. management has informed the company’s workers that the final report of the government appointed committee on taxation of natural resources issued Oct. 20 would prevent it from implementing its investment plan in Israel. In the letter, ICL management officially announced that it would cancel planned investments of $700 million in Israel, review a further $1 billion in investments, redirect planned investments outside of Israel, shut down its magnesium plant and speed up efficiency plans at other ICL facilities in Israel in order to reduce costs.
The powerful unions at ICL are expected to react to the letter and the committee recommendations in the coming days. This is likely to include lobbying efforts to prevent ICL management from closing the magnesium plant and other efficiency measures.
In its final report issued Oct. 20, the committee recommended a windfall profits or surtax of between 25 to 42 percent depending on the level of profitability. According to the recommendation a return on equity of 14-20 percent would mean a surtax of 25 percent and a return in excess of 20 percent would translate into a surtax of 42 percent. The committee also recommended a uniform 5 percent royalty tax on production of natural resources.
The recommendations now go to the Israeli government which will have to review them and decide on whether to amend them and then to the Knesset, Israel’s parliament for final approval. Meanwhile three senior Israeli government officials on the 11 member committee on taxation submitted a minority report calling for further concessions to ICL in order to guarantee continued investments in Israel by the company and prevent the shutdown of the magnesium plant.