Israel’s ICL halts $1bn of local investment on natural resource tax

19 May 2014 16:07 Source:ICIS News

LONDON (ICIS)--Israel Chemicals Ltd (ICL) has frozen domestic investment plans worth over $1bn after a government commission recommended the imposition of a 42% tax on the exploitation of natural resources in the country, the producer said on Sunday.

Government commission the Sheshinski Committee recommended a windfall tax of 42% on excess profits generated by companies extracting natural resources - such as potash fertilizer - in the country to boost state coffers, but ICL claims the move if enforced would be tantamount to driving it out of the country.

Some politicians in the country had claimed that the tax rates paid by natural resource extracting companies in Israel are some of the lowest in the world.

“The interim recommendations of the Sheshinski Committee are an economic and social mistake that will practically force ICL to go back on most of its investments in Israel, focus on optimisation and cost cutting and drive ICL out of Israel,” ICL said.

ICL, which posted a 57% year-on-year decline in net profit for the first quarter of 2014 on the back of lower fertilizer prices, said that its domestic capital investment programme has been halted until the conclusions of the committee’s interim report can are examined and understood.

The company added that an initial reading of the report indicated that the document may contain “inaccuracies and errors – both on a factual level and on an economic level.”

In the meantime ICL is to explore additional cost-cutting measures as a result of reduced investment and to lessen the impact of the cash pay-out, if the committee’s proposals are approved. A final decision is expected in late June.

“The current proposal will maximise the short-term cash generation for the government budget but eliminate one of the foundations of the Israeli industry,” the company added.

By Tom Brown