The Ethiopian Revenues and Customs Authority (ERCA) has blocked the bank accounts of the Israeli firm, Israel Chemicals (ICL), that has been engaged in potash development project in the Afar Regional State, Dallol Depression.
ICL ventured into the potash development project after it acquired Allana Potash, the Canadian company that owned the potash mine concession, in 2015. Two weeks ago ICL announced that it has decided to terminate its potash development project in Ethiopia due Ethiopian government’s failure to provide the necessary infrastructure and regulatory framework. It said it was required to pay a huge amount of tax based on illegal tax and unjustified tax assessment.
In a letter ERCA dispatched on October 10 to the banks where ICL has accounts, the authority informed the banks to freeze ICL’s accounts as Allana Afar, a unit of ICL, has failed to settle its tax arrears. ERCA blocked the money in the accounts of ICL (Allana Afar) not to be transferred to any individual or company.
Initially ICL bought 16 percent of Allana Potash. In 2015 ICL acquired the remaining 84 percent of Allana at the Toronto Stock Exchange. Allana Potash, which has been prospecting for potash mineral deposit in the Dallol Depression, discovered three billion tons of potash deposit. After conducting feasibility study on the potash development project, Allana secured a large scale mining license. But later, when it failed to raise the 750 million dollars capital required for materials, the project—due to commodity market crash— was transferred to ICL. ICL assumed all the assets and liabilities of Allana in Ethiopia.
After acquiring Allana, ICL requested the Ethiopian Ministry of Mines, Petroleum and Natural Gas to transfer Allana’s mining license. While the ministry was reviewing the application ICL was allowed to import machineries and continue work on the potash development project. Before the mining license transferring process was completed, ICL began wrangling with ERCA over tax issues.
Reliable sources told The Reporter that ERCA demanded ICL to pay 55 million dollars capital gain tax for the acquisition of Allana. The authority also requested ICL to settle the VAT and withholding tax that was supposed to be paid by Allana. The management of ICL has been negotiating with ERCA but failed to arrive at an agreement.
Following the announcement made by ICL to terminate its investment in Ethiopia, ERCA has frozen the company’s bank accounts. ICL has informed its staff in Ethiopia of its decision to terminate its project in Ethiopia. The company notified its employees that it would close its office and layoff its employees.
As ICL’s bank accounts are now blocked, it is unable to pay salaries and other benefits to its employees. The company has written a letter of complaint to ERCA protesting the authority’s decision. Sources said employees of ICL working at the field under harsh climate are at risk as the company is unable to deliver basic supplies.
“The government should protect the expensive trucks, machineries and other properties of the company found in the field,” sources said.
Tolossa Shagi, minister of Mines, Petroleum and Natural Gas, told The Reporter that the ministry advised ICL to settle the required tax payments. “We told them to appeal to ERCA if they think the tax amount is hefty. But they did not do that,” Tolossa said.
The ministry is trying to hold talks with the management of ICL to resolve the matter amicably.
ICL had a plan to build a potash solution mine plant and three fertilizer factories at a total cost of one billion dollars and create 3000 jobs.
ICL is the 6th largest potash fertilizer producer in the world and the 2nd in west Europe. ICL is a publicly traded company listed in the New York Stock Exchange (NYSE) with a capital of 12 billion dollars. Headquartered in Tel Aviv, the company earns an annual turnover of over six billion dollars. The company was established by the State of Israel in 1968 and was privatized in the 1990s.