The special committee, headed by MK Musi Raz (Meretz), discussed today (Wednesday) the State Comptroller’s report on the collection of taxes and levies from the gas partnerships. The committee’s chairman, MK Musi Raz, said: “A disturbing finding emerges from the discussion. It turns out that a late registration of a gas discovery could create a tax dispute in the courts, and tax losses for the State of Israel.”
Eli Marder, Audit Manager in the Economic Offices Division at the Comptroller’s Office, presented the auditor’s report and said that from 2011 to 2018, income tax collected from the gas companies was NIS 4.2 billion, compared to expected revenues of NIS 7.8 billion. By June 2021, NIS 741 million had accumulated in the wealth fund , Compared with the Bank of Israel’s expectation (in 2013) that by 2022 NIS 3.9 billion will accumulate.
Marder also said that the Sheshinsky committee recommended that the state’s share of the levy be around 60% to 70% on average. In 2015, the Bank of Israel estimated that the country’s share would be 47% to 54% of total revenues. The tax authority estimated that the state share would stand at 52% to 62% of revenue. He said there is no agreed-upon methodology for government ministries to calculate the state’s overall share of profits from gas discoveries. And that the state’s share of the profits is not publicized.
The auditor also found that there is a time difference between the two definitions and the determining day for calculating the beginning of the levy payments. The day before the discovery, and the day the application for possession of the discovery was submitted. According to him, the time gap causes a decrease in state revenues to the point of doubling expenditures.
The existing definition creates disagreements between the Tax Authority and the search companies as to what determines the date for determining the date of tax liability. The gaps affect the determination of the levy coefficient and increase search expenses by more than NIS 700 million. For example, the discovery of the Whale Reservoir was in December 2010 and the date of receipt of the holding was set for February 2014. According to him, the Whale Reservoir spent several hundred million NIS on drilling, before the venture was given hold. According to the rights holders, this is an expense that is eligible for benefits associated with the search period.
The deputy head of the Tax Authority, Ms. Miri Savyon, responded to the claim and said that the Tax Authority had collected the taxes legally, and that the Authority did not recognize the figure of NIS 700 million. According to her, we try to be transparent and present the forecasts. At the same time, changes in gas prices may lead to changes in forecasts. Regarding the Government Take share, Savyon said, currently the collection stands at between 59% and 62%, similar to our original forecasts.
Guy Smet from the Ministry of Energy responded to the criticism and said that the decisions of the Tax Authority to recognize expenses are not related to the Ministry of Energy’s determination regarding the holding day. The discovery is defined in the guidelines and the determination is defined in the regulations.
Eyal Golan from the Ministry of Energy admitted that there was indeed a time gap in the Levitan reservoir, but the time gap has no economic issues. According to him, the schedules are important for the entrepreneur and not for the Ministry of Energy.
Regarding assessment processes that are still open, Eli Marder said that there are disagreements regarding taxation in litigation between the parties in the amount of approximately NIS 850 million. At the request of the Tax Authority the information is in aggregate amounts without details of the taxpayers. According to him, the developers have submitted low assessments, and the tax authority has difficulty dealing with them, due to different interpretations of the provisions. If things were clear, there would be no disagreement between the parties.
The deputy head of the Tax Authority, Ms. Savyon, said that as of this morning, more than NIS 1 billion had accumulated in the wealth fund. At the same time, it is important to note that some of the funds were paid as advances and that the amount has not yet been finalized. According to her, the new legislation has great significance. The tools that the law has given to the tax authority will lead to better collection and the ability of the state to receive funds in a better way.
Regarding the forecast gaps, Ms. Savyon said that the 25% decrease in the forecast is due to a decrease in the price of gas, which is causing a decrease in taxes. The state is asking for its share of the profits to be kept, and that is exactly what is happening. A decrease in the amount does not cause a decrease in the collection percentage.
Ron Aifer, Deputy Director of the Gas Authority at the Ministry of Energy, said that according to the Gas Authority’s estimate, the economic savings for the State of Israel between 2004-2020 (economic savings that do not reflect the environmental economic benefit) resulting from switching to natural gas are about NIS 79 billion.
Gili Berkowitz of the Youth Protest for Climate Change said the transition energy is past energy. You are robbing our lives! Is all you interested in is just money? Do you not care about our lives? Her scathing remarks left the participants in the discussion speechless.
The committee’s chairman, MK Musi Raz, concluded the discussion on the question of why there should be two different deadlines, one for the tax authority and one for the Ministry of Energy. According to him, greater transparency is required regarding the recognition of investments in databases. I hope that the companies will provide the information to the committee on a voluntary basis, without us having to consider legislation on the subject.
The chairman of the committee noted that the committee recorded before it with satisfaction that the fund had accumulated NIS 1 billion, an amount that according to the law causes the beginning of the operation of the wealth fund.
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