Mar 16, 2014
A New Battle Over Resources in Israel
Posted on Apr 28, 2011
The Knesset approved a law late last month drastically increasing taxes on Israel’s mammoth, newly discovered offshore natural gas reserves. The vote should have been a clean victory for a coalition movement calling for broad socioeconomic change in the Jewish state, but powerful right-wing blowback weakened the bill in a saga eerily similar to the stripping down of President Barack Obama’s health care plan and the hollowing out of economic reforms in the United States.
The Sheshinski Law, which will double the tax on oil and gas to more than 50 percent in the near term and raise the level to as high as 62 percent later, passed by a landslide 78-2 vote after vigorous debate in the national legislature and the society as a whole.
The lobby behind the bill, made up of both left and right, was led by the Israel Civic Action Forum, which has been calling for profits from Israel’s only major natural resource to be used to help the poor and strengthen social programs. The bill came on a wave of strikes and demonstrations throughout the country in which workers from across the spectrum (nurses, social workers, prosecutors and foreign ministry employees, to name just a few) protested low pay and rising prices, forcing the government of Benjamin Netanyahu to raise the minimum wage.
A report of the international Organisation for Economic Co-operation and Development last year found Israel to have the highest poverty rate in the developed world (2.5 times the average) and the second-highest gap between rich and poor. An onslaught of neoliberalism is largely blamed for the problems, and the Israel Civic Action Forum is a reaction to economic policies seen as benefiting the rich at the expense of the poor. Prime Minister Netanyahu has cut income and company taxes while raising value-added taxes, lowering the purchasing power of the poor, who don’t benefit from a cut in income taxes (half of all income earners in the country don’t reach the tax threshold). The poor are also simultaneously forced to cope with water prices that have jumped 33 percent in two years (the utility is undergoing a broad privatization process), as well as with rising housing, gas and electricity prices.
“In Israel, there is such a close relationship between the government and tycoons, but we won because there was a public campaign,” said Rabbi Michael Melchior, founder of the forum and also a Meimad party member and a former Knesset member known for unifying left-wing ideals with the tenets of Orthodox Judaism.
Last year, 16 trillion cubic feet of gas was found at the Leviathan field in Israel’s Mediterranean waters, one of the largest offshore gas finds in the last 10 years. In 2009, the United States Geological Survey estimated there was 120 trillion cubic feet of gas under the eastern Mediterranean. Israel has staked a claim to much of the area in question; Lebanon also claims part of it.
Ever since the discoveries, a growing number of Israelis have demanded that their government change its policy of light taxes on natural resources, which until the Sheshinski law were among the world’s lowest, at 24 percent. The debate surrounding the law was so fierce that when economics professor Eytan Sheshinski suggested taxes should be higher, he was accused of plotting to push international investors into the hands of Lebanon and Hezbollah.
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