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Israel’s Sheshinski Sees No Taboo in Changing Resources Taxation

Israel has the right to revise its tax policies, said the economist leading a review of the country’s natural resources royalties and tax structure, parrying allegations that a changing regulatory environment would drive away investment.

The government-appointed panel led by economics professor emeritus Eytan Sheshinski of The Hebrew University of Jerusalem is due to hold a public hearing on the matter next week. Its recommendations will reverberate at Israel Chemicals Ltd., which harvests Dead Sea minerals to make fertilizers, and whose chief executive, Stefan Borgas, has warned that “frequent and unplanned regulation” is ‘‘poison’’ for the company.

Governments have the right to modify their tax policies, because while stability and credibility are a “worthy cause”, they must be weighed against other objectives, such as ensuring the public a fair share of the profits, Sheshinski said. “Changing the status quo should not be taboo.”

At the same time, “firms will have to receive a fair return on their investment to provide incentives for them to continue operation in the country,” he said. The panel will consider market conditions and sector risks when making its recommendations, Sheshinski said. Proposals are due in June.

Finance Minister Yair Lapid appointed the review committee last June with a mandate to ensure the public receives its due from natural resources. Recommendations by another Sheshinski-led committee three years ago were the foundation for the government’s decision to more than double its share of gas and oil profits.

Higher Take

Israel Chemicals is smarting especially at the prospect of a higher government take because the state already raised the company’s royalty payments and ordered it to pay 80 percent of the cost of a cleanup at its operations site two years ago.

Shares in the company, weighted fifth-heaviest on the benchmark TA-25 Index, have lost 25 percent since the government announced it would form the panel. International competitors Mosaic Co. and Potash Corp of Saskatchewan Inc. have declined almost 19 percent, battered by the breakup of a potash marketing cartel.

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