Official Israeli Tax Authority data reveal that in recent years Israel has not properly supervised the entry of goods into the Palestinian Authority, and as a result, PA importers submit false reports and receive billions of shekels each year, Israel Hayom reported Thursday. According to the report, in the peak year, 2021, Israel paid out NIS 1.5 billion ($410 million) for these false claims.
According to the Protocol on Economic Relations that was signed in Paris on May 4, 1994, Israel collects and transfers to the Palestinian Authority the import taxes on goods that were intended for the PA territories. Israel also transfers the collected tax revenue for goods and services sold in Israel and intended for consumption in the PA. Tax clearance is the largest source of the PA’s public income. In 2014, it accounted for 75% of the total revenue.
The Israel Hayom report suggests that most of the containers are not transferred to the Palestinian Authority at all, but are unloaded inside Israel’s territories, thus causing Israel enormous economic damages. For one thing, the state loses the import funds that belong to it and transfers them to the PA, even though some of the goods do not enter the PA at all and are sold within the green-line borders. Also, the goods that are sold are suspected of not being reported, which deprives Israel of the 17% VAT as well as income tax payments.
According to Israel’s State Auditor’s report, in 2016, 35% of the goods were not transferred to PA territories at all. In 2017, 37% of the goods were not transferred, and in 2018, 41% of the cargo remained in Israel and was sold illegally inside the green line. According to a report by the Tax Authority to the Auditor, in 2016 Israel lost NIS 450 million ($124 million) as a result of the container sting. The auditor also stated that there is insufficient enforcement.
The Tax Authority estimates that 50% of the goods for which Israel transfers funds to the PA as if it collected all the taxes for them – never made it to the PA.
Since the publication of the Auditor’s report and following a Freedom of Information request by the Lavi organization to the Tax Authority, it was discovered that the phenomenon was not only not addressed, but even expanded:
In 2019, 66% of the goods were not transferred to the Palestinian Authority, and Israel’s loss was about NIS 543 million ($149 million). In 2020, 70% of the goods were not transferred – a loss that amounted to approximately NIS 695 million ($191 million), and in 2021, 83% of the loads were not transferred – a loss of no less than NIS 1.5 billion ($410 million). But according to the tax authority’s assessment, the reported amounts should be cut in half, and if this is true, the loss to Israel in 2021 is “only” NIS 750 million ($206 million).
Israeli law enforcement agencies claim that their hands are tied since the Paris Agreement compels them to honor the importers’ statements on their faces. The Kohelet Forum petitioned the High Court of Justice demanding to change the collection policy, demanding that the state recover the billions of shekels it transferred to the PA based on false claims in the past seven years, because “the transfers are against the law and harm the public purse.”
