Israel's gas taxes grow in 2023, boosting sovereign wealth fund

Oil and gas companies typically challenge overall tax collections before they become definitive. After a four-year delay due to political turmoil and a slower-than-expected revenue stream, the fund began operating in June 2022 once taxes on profits from natural gas and other resources had passed a required minimum of 1 billion shekels.

Israel's Tax Authority said on Thursday that levies collected from profits on gas and excess profits on other natural resources rose by 2 billion shekels in 2023 to reach 6.55 billion shekels ($1.75 billion). Of that, it said 4.7 billion shekels are considered definitive and largely get converted to foreign currency and transferred to Israel's sovereign wealth fund, with $440 million of definitive taxes collected last year.

In September, the Finance Ministry said the fund's assets had topped $1 billion. Oil and gas companies typically challenge overall tax collections before they become definitive.

After a four-year delay due to political turmoil and a slower-than-expected revenue stream, the fund began operating in June 2022 once taxes on profits from natural gas and other resources had passed a required minimum of 1 billion shekels. The fund's assets are forecast to grow to as much as $12 billion in the next decade, the government has said.

Israel discovered huge deposits of natural gas in the east Mediterranean a decade ago and major production began in 2013. The wealth fund, aimed at preventing the Israeli shekel from overheating from the sudden expansion in national wealth, was set up in 2014 and was supposed to begin operating in 2018.

It is initially investing 60% in stocks abroad and most of the remainder in corporate bonds, according to the ministry. ($1 = 3.7385 shekels)