GAZA CITY, Gaza Strip — The Palestinian Authority (PA) announced Nov. 1 that it had officially taken over crossings into and out of Gaza within the framework of implementing the reconciliation agreement signed between Fatah and Hamas on Oct. 12 in Cairo. On the same day, Civil Affairs Minister Hussein al-Sheikh said in a press statement, “The consensus government has decided to cancel illegal taxes in Gaza, and the government will collect only the taxes imposed by Palestinian law.” By “illegal taxes,” Sheikh meant those that Hamas had imposed on goods entering Gaza when it controlled the territory.
Residents in Gaza have been subjected to double taxation since 2014: taxes on imported goods levied by the PA before they cross into Gaza plus taxes imposed by the Hamas government on the goods. After the failure to sign a reconciliation agreement with Fatah in 2014, Hamas imposed new fees on imported goods, services and public shareholding companies in the guise of a National Solidarity Tax, in a bid to cover the budget deficit resulting from the PA’s refusal to cover government expenses and ongoing international economic pressure. Goods coming through the smuggling tunnels from Egypt were also subject to Hamas-imposed taxes.
Osama Nofal, director general of Studies and Planning at the National Economy Ministry in Gaza, reminded Al-Monitor that the Hamas government had also imposed fees for paperwork and administrative services at ministries, such as issuing identity cards and birth certificates, that were not being levied by the PA on the West Bank. With the national consensus government now in control of crossings, Nofal said, “In the coming weeks, the Ministry of National Economy in Gaza and its counterpart in the West Bank will form committees to discuss tax unification and priorities for cooperation toward developing the industrial sector and solving the problems of the private sector in the Gaza Strip, among other important issues.”
Traders and manufacturers in the Gaza Strip are hoping that the Egypt-brokered reconciliation agreement will revive the economy. Nofal said, “Lifting taxes is a good step, but reviving the economy requires allowing the passage of merchandise whose entry into the Gaza Strip is forbidden by Israel and lifting the 10-year Israeli blockade.”
Nofal also said, “The employees of the national consensus government must start coordinating with Israel to open all the commercial crossings into the Gaza Strip, as was the case before the blockade was imposed and Israel’s refusal to deal with Hamas government or its employees to coordinate the work at the crossings.”
The transportion sector — that is, trade involving commercial and private vehicles — was among the most affected by taxes on imports. Wael al-Halees, deputy chairman of the Automobile Importers Association, told Al-Monitor, “Director General of Customs in Gaza Wael Rajab told us over the phone that the customs tax of 25% had been lifted for new vehicles entering through the Karam Abu Salem crossing. As a result of the internal Palestinian rift, the license fees on new cars in Gaza had doubled compared with the West Bank. Customs duties imposed on imported vehicles to the Gaza Strip reached 75% of their sale price. Fifty percent of the tax proceeds went to the PA and 25% to Gaza’s government. The customs duties imposed on vehicles imported to the West Bank are only 50%.”
Samih Tabila, PA transport and communications minister, had said in a press statement Oct. 22 in Gaza that he had submitted reports to the Cabinet to resolve the double taxation issue in Gaza and that he hoped it would be dealt with before the end of the year through a unified system fair to everyone in Gaza and the West Bank.
It even seems that some vehicle owners faced more than double taxation. Halees said, “The government imposed taxes on the car sector, but this wave expanded to several ministries. The Ministry of Finance collected double the customs duties, while the Ministry of Economy called for renewing the commercial registration of car rental companies every six months in addition to new fees to increase tax levying in this sector.” On Nov. 6, the Transportation and Telecommunications Ministry approved a decision to unify vehicle licensing fees.
Amin Abu Aisha, an economist who works at Al-Isra University, told Al-Monitor, “Canceling the new taxes and fees imposed during the division period will increase consumers’ purchasing power and will revive the local economy as well as reduce production costs because of the decreased tax burden on imported feedstock.”
Aisha said the reconciliation and tax unification also stood to curb tax evasion and favoritism enjoyed by organizational traders due to their political affiliation. The amount of taxes collected by the government is likely to increase, as the reconciliation and tax system should promote legitimate, taxable economic activity and minimize the underground economy, on which no taxes are levied.
Gazans are eager for economic recovery after the consensus government resumes administration, thus contributing to restructuring the economy that collapsed under 10 years of the Israeli blockade and PA’s absence.