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US Embassy in Tel Aviv
Photo: Omer Hacohen
US diplomat tries to prevent gas royalties raise
Acting US ambassador makes unusual step by trying to prevent State from raising tax rate for companies producing oil, natural gas in Israel including US Nobel Energy
A disagreement on the level of taxes to be paid to the State by companies producing natural gas and oil in Israel may evolve into a political spat with the United States. Acting US Ambassador to Israel Marc Sievers recently approached Finance Minister Yuval Steinitz in a bid to reverse his decision regarding the extent of royalties to be paid to the State by such companies as the US's Nobel Energy and Israel's Delek which have found natural gas in Israel.

 

Sources familiar with the issue claim that senior US officials may even bring the matter up before Prime Minister Benjamin Netanyahu and Minister Steinitz during Israel's induction to the OECD next week.

 

Following the discovery of a large natural gas reserve off the Haifa coast, Minister Steinitz decided to check whether companies which received a State concession to search and produce oil and gas were paying the government enough royalties and has a created a special committee for that purpose. The companies which found natural gas currently pay the government a 12.5% tax.

  

However, and contrary to the opinion of the Prime Minister's Office and the National Infrastructure Ministry, Steinitz has instructed the committee to examine changing the tax rate for groups which already found and started producing gas and oil, and not just for companies which might do so in the future.

 

International investment barriers

Consequently, the American administration has stepped in to aid Nobel Energy and its Israeli partners. Sievers claims that a discussion on a tax change is problematic. In a letter sent to the finance minister he noted that the decision may disrupt Israel's fiscal stability and create barriers for international investments.

 

He further stated that Israel's energetic independence may be compromised if investors start to pull out.

 

In addition, Nobel Energy representatives have approached several US senators and congressmen to pressure Israel.

 

Steinitz held talks with US embassy officials after receiving the letter, however his office refused to comment on the issue.

 

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