Palestine loses $300m in trade taxes a year to Israel

UN report defines as ‘fiscal leakages’ [polite term for ‘theft by Israel’] the customs, purchase and value-added taxes destined to the PA but retained by Israel
3 September 2013 The Guardian
The estimated cost to the Palestinian Authority of the $300m leaked annually to Israel is equivalent to 17% of total tax revenue.

The Palestinian Authority is losing about $300m (£193m) a year in “leakage” of customs, purchase and value-added taxes which are not transferred to the Palestinian treasury by Israel, according to preliminary UN estimates (pdf here).

The UN conference on trade and development (Unctad) defines fiscal leakage as Palestinian fiscal revenue destined for the PA but retained by Israel instead [In other words, Israel is stealing from Palestine -ed]. Palestinian trade taxes consist of purchase tax and VAT, levied on all imports, whether they originate from Israel or elsewhere, as well as additional excise tax and custom duties on imports from sources other than Israel.

Mahmoud el-Khafif, co-author of the preliminary report, said initial figures were higher but were revised when challenged by the Bank of Israel. “These are very conservative estimates,” he said emphasising that this fiscal loss is from two sources only. “We focused on leakages from indirect imports – goods produced in a third country, imported to Israel and sold on to Palestine. The second leakage is from smuggling.”

The report says the losses do not include the revenue leakages from many other sources, including taxes levied by Israel on incomes of Palestinians working in Israel and settlements; revenue loss from under-pricing imported goods in invoices due to lack of Palestinian control over borders and access to proper trade data; revenue loss related to lack of control over land and natural resources; financial resources loss related to goods and services imported through the Palestinian public sector (petroleum, energy, and water); and fiscal loss as a result of the smaller tax base caused by the destruction of the productive base and loss of natural resources to Israel’s belligerent military occupation.

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