The Palestinian government loses around $350 million a year due to Israel’s restrictions and violations of signed agreements, according to a recent report published by the Palestinian Authority. The estimated sum amounts to almost 30 percent of Palestine’s expected budget deficit in 2018.
That means taxpayers around the world are footing the bill for Israel’s wrongdoings. Now it’s time for Israel to pay up.
The latest report, titled Stopping Fiscal Leakages, was submitted in September to the Ad Hoc Liaison Committee (AHLC), a 15-member group chaired by Norway and co-sponsored by the European Union and United States, which serves as the principal policy-level coordination mechanism for development assistance to the Palestinian people. Without their foreign donor support, there would be no Palestinian government as we know it.
The report is the equivalent to a summons for Israel to pay up for the fiscal damage it is causing the Palestinians. Here is a peek into the $350 million annual losses:
Leakages resulting from lack of control over West Bank land
Based on signed agreements, Israel is authorized to levy and collect Value-Added Tax (VAT) and income tax, as well as deduct Israeli businesses’ income accrued or derived in what is known as Area C — the roughly 60-percent area of the West Bank that is under full Israeli control. The report estimates that around 2,000 Israeli businesses and individuals currently operate in and derive income from Area C. Since the year 2000, Israel ceased all tax transfers and stopped informing the PA about Israeli commercial activities in Area C, which have accumulated to around $360 million.
Leakages resulting from fees on fuel purchases
Since 1994, Palestine has imported fuel through Israeli companies. According to the report, between 1994 and 1996, the Israeli government transferred the excise tax for fuel purchases to the PA. Given the lack of administrative work involved, it did not deduct a handling fee. However, since 1996, Israel has been imposing an additional 3 percent handling fee. The report estimates that the PA is currently losing around $26 million each year as a result.
Leakages resulting from indirect imports
Israel does not permit Palestinians to have a direct connection to the outside world. Therefore, they are forced to use Israeli ports to import goods and equipment. Israel is obliged to transfer all import taxes and other levies it collects on goods that are directly imported from Palestine or end up in an area under Palestinian jurisdiction.