The Social and Economic Policies Monitor (Al-Marsad) believes that the statement of the Minister of Finance Shukri Bishara during his meeting with the Private Sector Coordination Council, in which he announced cancelling the highest taxation categories, is a blow to the principle of social justice and a continuation of the impoverishment policies of the society, the working class and all workers and employees. This decision clarifies the Palestinian government’s persistence to follow a tax-collection policy in favour of the rich and at the expense of the poor and the public. Meanwhile, the rich and businessmen avoid any burdens or commitment resulting from profits gained from their business in the occupied Palestinian territories.
Al-Marsad emphasizes that the Minister of Finance’s plan that he announced in the abovementioned meeting, which stipulates that the 20% category is cancelled and to suffice with the 15% category for major companies and businessmen, means that the Palestinian treasury would suffer a loss of millions of Shekels annually. Moreover, his statements on the approach to adopt a 10% taxation category means that the treasury would lose even greater amounts.
The minister’s decision is considered a luxury at the expense of all workers and employees, particularly in light of the financial crisis faced by the Palestinian Authority as a result of the occupation’s confiscation of large sums from the clearance bill, and the subsequent failure to pay the salaries of civil servants in full. Furthermore, this decision will result in weakness and decline in the quality of basic services provided by the government, such as education and health, which will certainly be impacted by the government’s generosity towards the private sector. The continued favouritism in the government’s policies towards the rich have become absurd to the extent where the corporate tax contribution to the total taxation revenues is only 3.5%.
Al-Marsad notes that the Palestinian taxation system is structurally flawed and relies completely on revenue from indirect taxes that constitute 92% of the total tax revenues. In other words, the Palestinian public assume the taxation burden and pay the PA’s revenues in full, while the contribution of corporates and businessmen ins marginal and much less than neighbouring Arab states, such as Jordan and Egypt, and less than advanced states where some taxation categories on income and wealth of individuals amounts to 40-45%. This indicates social justice and the distribution of burden in accordance with income, wealth and gained profit.
Al-Marsad stresses that cancelling the 20% category instead of raising and amending taxation categories under the Income Tax Law to reach at least 35% indicates that the government is persistent on impoverishing the Palestinian society. This also emphasizes that the Palestinian government considers the interests of the private sector more important than the interests of millions of citizens. This indicates that a large number of major companies, businesses and businessmen enjoy tax exemptions in accordance with the infamous Investment Promotion Law without even announcing the names of such companies, the amount of exemptions, and the justifications for the exemptions by any ministry or the Palestinian Investment Promotion Agency. This means that corporates enjoy a number of taxation privileges that enable them to gain additional profit and accumulate wealth at the expense of the Palestinian people’s economic interests.
The Minister of Finance addressed the reduction of the Value Added Tax (VAT) and taxes on basic commodities, which was called for by Al-Marsad for years to achieve tax justice. However, the minister did not clarify the mechanism followed in the reduction of the VAT or how taxes on basic commodities will be reduced without infringing Paris Protocol that obligates the PA to commit to a 2% margin from the Israeli VAT. This means that the minister’s decision only serves the interests of corporates, and the other statements are just for media purposes.
Al-Marsad emphasizes the importance of relying more on direct taxes, because there are fairer, and reduce the indirect taxes, because they affect the poor in the same manner as they affect the rich. Al-Marsad also stresses that tax justice is realized in accordance with clear rules and laws that are not subject to the whims of the Minister of Finance, and based on the increase of direct taxes on wealth, profit and income and lower taxes on employees, workers and working classes.