Citizen and economy victims of double taxation

By: Walaa Sa’afin


The Palestinian internal division has no longer been the only threat for the Palestinian people daily life. Danger lies in the repercussions of the internal division which emerge in all that committed by the disputed parties of the division and all acts that negatively affected the people’s daily life.

Many laws, procedures, and decrees having the force of law, would not have been enforced if there had not been struggle for power caused by a political split of June 2007.

The Palestinian citizen suffers double taxation even after the formation of the national consensus government led by Dr. Rami al-Hamdalla, because of the inconsistent laws and rules issued by the Palestinian government in the West Bank and the de facto Hamas ruled government in Gaza.


When Double Taxation entered into force?

Income Tax Law No. (17) was issued in 2004 and was in force in the West Bank and Gaza Strip until 2008. In 2008, Palestinian president Mahmoud Abbas issued Law No. (2) to be only applicable to the West Bank to amend the Income Tax Act No. (17) of 2004. Abbas’ decision to reduce income tax rate for individuals aimed at amending the law for the benefit of segments targeted by the law (the majority of law income people).

Abbas’ decision was not applied in Gaza and a law was not enforced due to the internal split between West Bank and Gaza Strip. Therefore, the tax law prevailing in the West Bank partly differs from of those prevailing in the Gaza Strip not to mention the existence of two different tax systems one in the West Bank and the other in Gaza Strip. The current situation is the worst since the Israeli occupation period.

The period following the adoption  of tax Act No.17, which actually extended for more than 6 years, witnessed a lot of changes in the economic and social realities in the Gaza Strip. During that period, second Palestinian Legislative Elections carried out and Hamas movement won a majority of seats in parliament and moreover the tenth government was formed, and moreover the worst happened, the Palestinian internal occurred and a tight blockade was imposed by the Israeli occupation in an unprecedented manner.


The Division Price:

Since September 2010, when Israel allowed, for first time since years, to import new automobiles into the Gaza Strip, high prices of automobiles were witnessed in Gaza auto markets. Gaza auto markets were distinguished from their counterparts in the West Bank by the prices of the automobiles.

Mohammad Qawwas, Gaza-based vehicle import company owner, said “taxation cuts our source of livelihood. We pay value-added tax, income tax, and entry fees in accordance with the applicable law enforced by the consensus government. Despite this, the de facto government of Hamas insists to collect more taxes from us .. this is unacceptable .. this is injustice .. they have instead to compassionate with us the time people experience harsh economic situation. They have to reduce taxes but even to eliminate taxes instead of imposing new taxes.”

He went on saying, ” This unjust decision is undue. In all countries around the world car prices drop to make it available for customers to purchase them, and automobile traders and investors are supported by the government, meanwhile in Gaza, the de facto government invokes the internal division and the occupation’s blockade to collect from traders.”


Big Difference:

Difference in car prices in the Gaza Strip compared to the West Bank bug in numbers depending on the type of the automobile and the automobile’s year of production.

Ismail Nakhaleh, Director of Automobile Importers Association in Gaza Strip, explained the big difference in automobile prices, saying ” the high car prices in the Gaza Strip do not commensurate with the citizen’s purchasing power due to high customs levied by the Palestinian Authority (PA) in Ramallah. The PA collects a purchase tax of 50% in addition to value-added tax of 18%, moreover, customs equation collected from traders for automobiles with a certificate of origin and imported from Europe which together reaches up to 72%, according to the price list prepared b the Palestinian Authority (PA); whereas customs equation for the automobiles imported from East Asia reaches 84% due, first : they do not enjoy European market certificate specifications and second : the income tax.”

He went on saying, ” the Palestinian Authority has previously reduced customs on the imported automobiles for 6 months; which increased PA’s custom revenues 5 times.” He considered the decision as a positive decision that had positive impacts on both Gaza Strip and West Bank.


Measures & Protests

Regarding to car importers protests against government’s decisions, Nakhaleh said, ” We tried to reach the Hamas-rule government in Gaza but it turned deaf ear to us. The government refuses to answer our calls or even to dialogue with us, ” He went on saying, ” Despite addressing the government repeatedly, they rejected our attempts. The government is opinionated and determined to implement the decision.”

He added, ” In early June, 2015, the government began to impose a tax of 25% which led to higher prices of automobiles; for instance, the price of some automobiles increased to 8 to 1500 thousand dollars.”

He went on explaining that, the importer in the West Bank receives the imported automobiles in two months only, thus, the trader do not have to pay storage fees neither automobiles are sold to 4 or 5 retail traders. The  trader gets a better percentage of  profit due to selling the automobiles immediately. Whereas in the Gaza Strip, the trader purchases the car and waits his turn for one year and a half. As a result, money turnover is long which forces the trader to raise the price of the automobile.


Taxes under various names:

Sabri Abu Ghali, owner of  export and import company, imports wheat, barley, corn and fodder from Russia and Ukraine. The man pays the official tax for the PA in the West Bank when his imports arrive in Haifa seaport south Israel. The amount he pays reaches 18%. Moreover, he pays 20 Shekels for each one ton of wheat and 50 shekels for each one ton of the rest mentioned above crops. The amounts he pays for the crops are collected from him under the name of “import license fee”.

“We import basic materials and pay all taxes imposed by the legitimate law applicable under the reconciliation government,” said Abu Ghali adding ” Amounts collected from us as foodstuffs importers under the name of ”import permit” is illegitimate and illegal. It exists only in Gaza and created by the de facto Hamas government to exploit the dealers as a source of income for the government.”

The man added, ”I see this as unacceptable blackmailing, to add a burden on us. We mainly suffer from the Israeli blockade. All what we enter into Gaza are raw materials. Thus, we cannot tolerate more obstacles.”

He went on saying, ”what provokes us more and more is that the amounts we pay are not recorded within the tax books, which means that we cannot added them to the price of the crops while selling them due they will bring us enormous profits. Thus the amounts we pay at the end of the year for something imaginary and fanciful.”

Moreover, Customs Department at the Ministry of Finance in Gaza, imposed, on traders importers of various goods from overseas, an additional tax under the name of “Ramp Fees” which means that the price announced earlier by the importer of goods is amended after an agreement with the Customs Department to determine the tax value it collects from dozens of sorts of goods imported from overseas markets into Gaza markets.


Gaza government adheres to collect tax revenues:

Ziad al-Zaza, member of the Legislative Council and deputy prime minister of ex-Hamas-rule government in the Gaza Strip, denied any double taxation in the Gaza Strip. He adheres that taxes and customs collection carried out by Hamas is legal.


“75% tax on automobile import was imposed after an agreement with the government in the West Bank. 50% of the tax was supposed to be transferred to the Palestinian government treasury meanwhile the rest 25% was supposed to be granted to the de facto Hamas government in order to equate the price of cars imported through border tunnels with the prices of cars imported through Israel,” said al-Zaza.


He went on saying, ” after the internal division and after Salam Fayyad became a prime minister for the government in Ramallah, Fayyad issued a decision to reduce the tax to 50% . The decision had had no legal basis, due Fayyad took  it without negotiating us thus we (Hamas) are not obliged to comply with the law. We only implement the law we have agreed upon.”


Regarding to the value-added tax which estimates 16% imposed on the imported cars of which importers pay a tax estimates 18% also as a value-added tax for the Ramallah-based government, Al-Zaza said, the government in Ramallah has no right to impose this tax because the taxed goods are sold in the Gaza Strip not in the West Bank, thus the amounts collected as taxes must flow into Gaza’s bank accounts.


Regarding the permission to import, Al-Zaza said, ”The measures are normal and they aim at safeguard the rights of the  trader. They facilitate and regulate the process of importing the goods to avoid any disruption.”


He added, ”Import permission allows us to control goods and help traders to profit. It is an integrated operational process.”


Al-Zaza stated that all the fees paid by traders for goods import are usually deducted from operating expenses before paying tax at the end of the year.


He stressed that collecting of taxes and customs, and even the solidarity tax; which recently caused a lot of confusion, are government’s attempts to manage the crisis and find an outcome of the pressure imposed by the unity governments over Gaza government after it abandoned Gaza employees by failing to fulfill its obligations to implement Cairo agreements regarding the question of Hamas employees.


On 23 April  2014, Fatah and Hamas achieved ”Shati” reconciliation agreement, later several meetings were held to rearrange issues and end the disputes. It was supposed that consensus government took over the tasks and rule in Gaza Strip; however, that did not happen because disputes continued.


General Administration of Customs and Excise in the Ministry of Economy in Gaza, issued a statement just days after the formation of the consensus government, announcing its decision to cut off an amount of 5.000 Israeli shekels ( 1 dollar equals 3.5 shekels) for each cargo container, thus ignoring that in such cases the tax value considered with regard of the type of the goods transported in the container.


According to the statement, 1500 shekels were supposed to be collected of each container (each container is 400-feet long) carrying food, moreover, a tax of 5.000 shekels was imposed on each container of imported Chinese clothes and a tax of 3.000 shekels was imposed on each container of imported Turkish clothes.

It should be said that about 50 varieties of essential goods and materials that are daily imported into the Gaza Strip after being transported from West Bank, are subjected to taxes imposed by the ex-Hamas government.


Tax Abuses:

Maher Tabbaa, Gaza-based economic analyst and official in Chamber of Commerce, said that tax abuses have negative impacts on the besieged citizens in the Gaza Strip in the light of high rates of unemployment and poverty and amid lack of purchasing power of large number of citizens.

Tabbaa condemns the absent role of the ministers of the Palestinian consensus government to standardize the procedures and fees in all governments ministers in the West Bank and their counterparts in the Gaza Strip.


The Origin of Law and Legislation:

Jalal Hallaq, Legal advisor, said that the Palestinian Basic Law amended in 2003 provided that ” Imposition, amendment or cancellation of taxes shall be by law. Taxes and fees shall be accredited to the public treasury and accounted for in accordance with the provisions of the law. Their payment shall not be forgiven except in cases provide for by law. In imposing and Taxation can only be waived in cases determined by law. Attention shall be given in imposing and accounting for them to equality and social justice.”

He added, “There are international rules for taxes payment; for instance double taxation is prohibited, if a foreign citizen working on a territory of a state and pays taxes for the state he exists in, he is not required to pay taxes for state he came from (home country).”

Laws unification:


Samir Abdullah, Gaza-based expert of economic affairs, warned of an expected deterioration in of economic situation unless laws and measures are unified.


“When a national consensus government was formed, people expected the government to address the duplication and difference between laws and legislations, decisions and procedures, taxes and customs, and rules and regulation, in the Gaza Strip and West Bank.


This ‘illegal’ difference and duplication increased and deepened during the internal division period; they badly affected the private sector in the Gaza Strip and weakened and limited it’s growth in the West Bank. They also badly impacted the largest companies that have branches both in the West Bank and Gaza Strip such as Banks, insurance companies, public shareholding companies, and some private shareholding companies.


Abdullah stated that measures taken by Hamas-rule government in Gaza lead to tax evasion and negatively impacts the performance of the government in the West Bank due the failure of the de facto government in Gaza to send the tax money to the Palestinian treasury in the West Bank. Therefore, this causes lack of confidence between the citizen and the government which deepened the gap and division between West Bank and Gaza Strip.


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