Thursday, January 27, 2011

Israel follows Norway’s Lead With a High Tax on its Massive Off-Shore Oil Find

A new tax plan proposed in Israel, following the tiny nation’s startlingly large oil and gas find in the Leviathan field off its Mediterranean coast, would roughly double current tax rates to as high as 62% of revenues from gas and oil drilling. Israel already has a gas tax that supports hybrids. Norway taxes oil revenue at 78%, while tax rates on oil in nations like Nigeria are more around the 30% range.

This Sunday, the Cabinet adopted the committee’s recommendations for the 62% tax in full. Prime Minister Netanyahu told the Globe that the revenue should be spent on “education, education and education, and one other thing – defense.”
“The resource is important to Israel’s economy and to Israel’s future,” Netanyahu said at a cabinet meeting. “We will cooperate with the investors in order to bring the gas to Israel quickly, and so the most important thing now is to move forward.”

Unsurprisingly the tax proposal was not well received by the oil companies involved, Israel’s Delek Group and its Texas-based partner Noble Energy, who made the find. US oil producers have long been pampered by oil-industry-written tax breaks. But Israel is not the US. At this point, it’s up to the Knesset, which would still have to approve the higher tax rate. Israel could well decide to follow Norway’s more socialist example.

Norway’s oil wealth has proved the exception to the resource-curse. With the discovery of extractive fossil energy, the pattern has been for nations and states to become less democratic and more corrupt, have less economic growth and more conflict, less innovation and more social inequality.

But Norway bucks that trend, by putting a tight control over fossil wealth, and spreading it through its very egalitarian society. With its discovery of North Sea oil, it moved to put a high tax rate on its massive off-shore oil and gas finds.

Source: Green Prophet

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