A new report by a Palestinian human rights group has slammed Israel’s practice of withholding tax revenues from the Palestinian Authority.
But in December, when the PA announced it would join the International Criminal Court, Israel began withholding the revenues as a punishment. At the end of March, it agreed to resume transfers, and send back the monies it had accumulated.
But on Sunday, the PA announced it was paying it back to Israel, because they had not been given the full amount. Israel reportedly deducted one-third of the amount to pay off alleged PA debts to Israeli utility corporations.
PA leader Mahmoud Abbas said: “We are returning the money. Either they give it to us in full or we go to arbitration or to the court. We will not accept anything else.”
The PA’s tax revenue is a combination of income, sales and import taxes and constitutes three-quarters of the Palestinian Authority’s revenue.
Al-Haq says the siphoning of Palestinian money to private companies for alleged debts is illegitimate, as the mid-century trials at Nuremberg established. The report suggests that Israel has manipulated the alleged debt owed to Israeli private companies as an excuse to collectively punish the Palestinian population for the PA’s actions at the International Criminal Court.
After allowing hundreds of thousands of Palestinians to go for months without their salaries (in addition to severely compromising the livelihoods of non-government employees) Prime Minister Benjamin Netanyahu told the press he was resuming payments out of “humanitarian considerations.” However, Netanyahu has so far refused to restore the full amount the PA is owed.
In late February, Israel used the seized Palestinian taxes to pay an alleged debt to the Israel Electric Company after the private company shut off electricity in cities in the northern West Bank. While Israel asserted that the decision to cut power was a private decision by the company, Al-Haq suggests otherwise.
As the occupying power, Israel is responsible under the Geneva conventions to “ensure public order and civil life” and it may only collect taxes to that end.
While shutting off the electricity may have been Israel’s attempt to cleverly hide an outright theft in the guise of meeting an urgent priority, the government had essentially seized Palestinian money — more than $500 million — and used a significant portion of it to pay a private company. “Any profits predicated on violations of international criminal law amount to the proceeds of criminal enterprise,” Al-Haq writes.
Al-Haq calls into serious question the legitimacy of these debts. Some of the debts owed to the Israel Electric Corporation derive from from areas not under PA control. Furthermore, those debts which Israel claims are owed to its water company, Mekorot, are entirely fraudulent, since the company has illegally appropriated Palestinian water sources, which it then sells back to the Palestinian people at a profit.
While the suspension of transfers is a response to the actions of the Palestinian leadership, it has had devastating effects on Palestinian lives, which Al-Haq describes as “unusually reliant on the public sector.” Fifty percent of PA spending goes to the salaries of its 215,000 employees. Even before the transfers stopped, the PA was operating at a severe fiscal deficit. When they did stop, the government was forced to reduce salaries by 40 percent.
Al-Haq’s report emphasizes the staggering repercussions on Palestinian life of freezing the PA’s budget. Whether or not a person is paid directly by the Palestinian Authority, the livelihoods of the entire population experience an impact when there is freeze in public funding.
For example, Al-Haq’s report includes an interview with the owner of a men’s clothing shop in the northern West Bank city of Jenin. The man details how his business had been crippled after the salaries of PA employees were terminated in December 2012, when Palestine applied to become an observer state at the UN and Israel froze tax transfers.
In Gaza, the seizure of PA taxes directly obstructs health services, and last month, Gaza’s only electricity plant increased its power outages from twelve to eighteen hours a day due to a lack of funds.
Writing for Al Jazeera English, Tony Laurence, the Chief Executive of Medical Aid for Palestinians, said that many of the staff at hospitals in Gaza have not been paid at all or received only part of their salaries after Israel seized tax revenues.
On Thursday, 9 April, thousands of unpaid public employees in the Gaza Strip went on a strike to protest what the general union called the unity government’s “irresponsible” decisions. The strike excluded most health workers.
To illustrate how precariously dependent the West Bank’s economy is on PA spending, consider the following. Last year, the United Nations Conference on Trade and Development (UNCTAD) found that the private sector of the occupied West Bank and Gaza Strip was “incapable of job creation,” showing that the economic growth had declined from eleven percent in 2010 to 1.5 percent in 2013.
The deceptive appearance of growth a half decade ago was artificially inflated by donors, aid and private investments, all of which has ebbed to a stop in recent years. UNCTAD attributes the nosedive in growth in part to Israel’s punitive measures such as withholding taxes.
History of abuse
Israel collects these taxes in accordance with the 1994 Paris Protocol for a fee of three percent, and then transfers the rest to the Palestinian Authority every month. In 2013, UNCTAD estimated the Palestinian Authority loses $300 million every year during this transfer process.
Israel has a long history of using its control over Palestinian tax revenue as an instrument for punishment of the population. According to Al-Haq, this latest interruption is the seventh time Israel has withheld Palestinian taxes as an act of political reprisal.
The first instance occurred in the summer of 1997, after a suicide bombing in Jerusalem. Israel then withheld taxes during the first two years of the second intifada, again for a year after Hamas won Palestinian elections in 2006 and once again after the Palestinian Authority signed the first reconciliation agreement with Hamas in May 2011.
In recent years, Israel has used the tactic to punish the Palestinian population every time the PA has pursued diplomatic avenues in the international legal system: when “Palestine” was accepted as a member of UNESCO in November 2011, when the Palestinian Authority became a “non-member observer state” in the UN General Assembly in late 2012 and now again with its accession to the Rome Statute (the move required to join the ICC).
In addition to recommending that the ICC investigate the seizure as a grave breach of the Geneva Conventions, Al-Haq encourages the prosecution of individuals on the basis of universal jurisdiction.