Two and a half years after the start of operation of the Israeli sovereign wealth fund, known as the Citizens Fund, the size of the fund has reached 7.5 billion shekels. The Israel Tax Authority reports that as of the end of 2024, fees collected on gas profits and excess profits on natural resources totaled NIS 7.5 billion, of which NIS 6.1 billion were final taxes (amounts that cannot be disputed). In total, approximately NIS 1 billion were raised in 2024, compared to approximately NIS 2 billion in 2023. About NIS 1.5 billion became final in 2024, compared to approximately NIS 2.6 billion in 2023.
The decrease in duty collection in 2024 compared to 2023 is due to the continued decline in global commodity prices after the price peak in 2022 (due to the Russian-Ukrainian war), as well as higher investments planned in 2024 in one of the projects that reduced duty collection.
Types of taxes collected by the state
Local gas companies pay several types of taxes to the state on their income and gas production. First, there are royalties of 12.5%, determined by the Petroleum Law from the moment production begins in the reservoir. The royalty collection process is managed and monitored by the Department of Energy’s Royalties Division and the funds are transferred directly to the Ministry of Finance. Secondly, there is corporate tax (income tax) at a rate of 23% of profit, which is determined according to the Income Tax Law and administered by the Tax Authority – and is also transferred directly to the Ministry of Finance. Third, there is the tax on excess profits from natural resources (known as the Szczyński tax), at 20% – 46.8%, after a return on investment of 150%. This is a special tax established following the report of the Sheshinsky Commission, which is administered by the Tax Authority and transferred to the Citizens Fund administered by the Bank of Israel.
The fund was established and began its work in mid-2022 after more than one billion shekels had accumulated in its coffers. The purpose of the Fund is to manage state revenues from the tax on natural resource profits from a long-term economic perspective in order to generate profit and enable the continued existence of the Fund for future generations. In addition to fees on gas profits and excess profits from natural resources allocated to the Fund for Israeli citizens, holders of energy rights and holders of rights to exploit natural resources also pay income and revenue tax, which is paid into the state budget on an ongoing basis. .
The Tax Authority transfers the collected levies to the fund on a quarterly basis to the Accountant General at the Ministry of Finance, who manages the levies for a temporary period until they are completed, before transferring the completed levies to the Citizens Fund once every three months. With investment profits (or minus losses), after they are converted by the Bank of Israel into an amount in foreign currency.
Published by Globes, Israel Business News – en.globes.co.il – on January 15, 2025.
© Copyright Globes Publisher Itonut (1983) Ltd., 2025.
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