Yitzhak Tshuva is Israel's natural gas king, it is true. He invested millions of shekels in gas exploration even when the Israeli government did not believe that any was to be found. He should not have to apologize for it, not him, not his US partner, the kind of foreign company that we so much want to invest in Israel.
The Ministry of Finance's astonishing idea to change the rules for royalties now, after gas has been found, raises questions, but worse, it drives Tshuva and his partner into a corner, and causes irreversible damage to the Israeli economy and its economic image in the world.
Israel sought to encourage oil and gas exploration on its territory. The slow and costly exploration process requires millions upon millions of dollars in investment over many years with no certainty that there will be any rewards for the effort.
The government legislated royalties on the basis of a specific arrangement in order to create incentives for investors to seek natural gas. These explorations sometimes failed - but they sometimes succeeded. We're not talking about an unreasonable expectation that Ministry of Finance officials could not have foreseen.
Now, with the results of the seismic surveys about potentially the largest gas discovery in the region, someone at the Ministry of Finance decided to change the rules without any prior announcement. Someone there remembered just at this moment that the royalties formula was inadequate, and while the cuts in the companies tax and marginal maximum income tax rates on individuals might provide a moral and public justification for dipping into Tshuva's pocket, since the natural gas belongs to all of us. It is unacceptable that the gas discovery sends us back to the era of "the public's sharing in the profits", slogans that remind of the slogans of yesteryear.
This is sheer aggression. Tshuva did his work, Tshuva should go now? Where exactly? He is a tycoon who invested from his fortune when no one, including the government and the Ministry of Finance officials, believed that there was something to invest in. To the same degree, Tshuva could have put his money in without reading the contract.
If the state wants to encourage investments and implement low royalties, then it should go all the way with the policy, even if there are positive findings. If not - it should have announced from the beginning that there was a system of high royalties and then seen which of our tycoons invested in exploration, or which of the few foreign companies, which despite everything still seek opportunities in the Israeli economy, decided to invest their money.
But if we claim to be a developed nation, the Ministry of Finance cannot retroactively change the rules, because there have been positive findings, just like a bad boy who loses and decides to change the rules of the game. Hat's not the way to play.
Moshe Lion is managing partner of Lion, Orlitzky & Co. accountancy firm and a former director general of the prime minister's office.
Published by Globes [online], Israel business news - www.globes-online.com - on June 7, 2010
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