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The Economic Impact of the Conflict on Israelis and Palestinians

Palestinians Are Being Robbed by Israel

Amira Hass is an Israeli columnist for the major Israeli daily newspaper Haaretz. She is one of the only international journalists to live amongst the Palestinians.

By Amira Hass
Haaretz
February 28, 2006

It is evidently difficult to scrub off the sticker that is glued onto the front window. That's why when a new car from Germany or South Korea or the United States rolls onto the packed streets of Gaza or Ramallah, it generally has the big label with thick, red Hebrew letters forming the word "Checked" stuck on its windshield for several months.

The label is a mark of the special customs and security checks conducted at the Israeli seaports of Ashdod or Haifa, which serve as the main entrances for most of the foreign goods bound for the West Bank and Gaza. Palestinians import all sorts of products: water pumps from Sweden, bulldozers and boxes of corn flakes from the United States, plastic toys from China, washing machines from France and cheese from Denmark – and virtually all of them reach their destinations only after they've been through Israeli port authorities and Israeli security checks.

At the ports, Palestinian importers are required to pay the Israeli authorities the value-added tax of 17%, as well as whatever custom taxes are due on goods that come in on their way to the West Bank or Gaza. These transactions (along with direct Palestinian transactions with Israeli firms and merchants) last year yielded revenues of $711 million.

But whose revenues are they?

To judge by the actions of the Israeli Cabinet on Sunday, the money belongs to Israel. The Cabinet announced that it was going to withhold Palestinian tax and customs revenues, at least for the moment, as a response to Hamas' electoral victory. Until the money is released – if it is released – the Israeli treasury will earn the interest.

But it's not supposed to work this way. According to the Oslo accords (and by any standards of common sense and basic justice), the revenues should serve the people who ultimately buy the goods. These tax receipts are not donations of goodwill from Israel; they are not charity. This is not like, say, Dutch foreign aid money, which is given freely by the Dutch people and can be withheld if the Dutch choose to stop giving it. These are tax revenues that are due to the people in the territories where the goods are headed, and the Israelis have no right to hold them up.

Since 1994, these revenues, transferred each month from the Israeli Ministry of Finance, have made up a critical portion of the Palestinian Authority budget. When Israel briefly stopped transferring the revenues in 2001, pressure from the EU and other countries – including the U.S. – forced Israel to reverse its decision. Unfortunately, after the Hamas victory, such pressure seems unlikely.

Last year, the $711 million constituted almost two-thirds of the Palestinian Authority's revenues. (Only $383 million was collected in income and sales taxes within the West Bank and Gaza.) Even with all those revenues, there was still an $800-million shortfall in the Authority's $1.9-billion budget. Why are domestic tax receipts so low? Because the economy is in constant recession and "operates well below its potential," according to the World Bank.

What debilitates and cripples the Palestinian economy is Israel's heavy, systematic restrictions on movement within the occupied territories – hundreds of roadblocks and military checkpoints that delay, prolong and sabotage normal economic activity and, hence, potential tax revenues.

The Palestinian Authority cannot compensate for the "lost" – or perhaps it would be more accurate to say "stolen" – tax revenues.

Its Ministry of Health, for example, has been unable to pay its contractors for hospital food, equipment or medicine for three months, and is $22 million in debt. Now, with Israel hijacking an additional $50 million or so each month, the ministry will not be able to pay the salaries of its 13,000 employees. The same is true with the approximately 40,000 employees of the Ministry of Education.

In the Palestinian territories, 35% of residents between the ages of 20 and 24 were unemployed during the third quarter of 2005. About 43% live below the World Bank's poverty line, and 15% live in deep poverty – which means, according to the World Bank, that they are unable to meet subsistence needs.

By taking their meager – but undoubtedly their own – revenues, Israel does not punish Hamas or persuade it to change its positions. It simply gives the Palestinians another reason to regard Israel as an aggressive and repressive occupying power.

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Multimedia

UN Presentation of Right to Food Report

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Occupation and Aid

Palestinians Are Being Robbed by Israel

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More Articles on Economic Impact

Additional Resources

World Bank Report – Twenty-Seven Months – Intifada, Closures and Palestinian Economic Crisis

UN Report – The Right to Food

Organizations

The World Bank

The CIA World Factbook

MIFTAH

The Palestine Monitor

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