Israel’s Supreme Court, sitting as the High Court of Justice, issued a conditional order against the State of Israel on Monday for a potential unlawful transfer of billions in shekels of import taxes to the Palestinian Authority.
It is now up to state authorities to explain why the transfer of the funds is continuing routinely despite a discrepancy between declared goods imported into Israel and the goods subsequently entering the Palestinian territories.
Justices Noam Solberg, David Mintz and Yosef Elron ordered Finance Minister Bezalel Smotrich, the Israel Tax Authority and the State Attorney’s Office to provide answers in the next court discussion, Yakov Sela, spokesperson for one of the organizations that petitioned the High Court on the issue, told JNS on Monday.
“We conducted a comparative analysis. We checked how many of the goods that are supposed to enter the Palestinian territories arrive at Israeli seaports in Ashdod and Haifa, versus how many goods actually enter the Palestinian territories,” said Sela, the spokesman for Lavi, an NGO that deals in proper administration and civil rights.
“What we have found is that 60% of the goods never enter the Palestinian Authority,” he continued.
“So Israel pays the P.A. its declared [import] taxes, but in reality the merchandize is sold in Israel [without import taxes]. We pay the P.A. 60% taxes that it doesn’t deserve,” Sela said.
Israeli and Palestinian importers arrive at Israel’s ports to pick up the goods, they pay import taxes to Israeli authorities, who then transfer the full sum to the P.A. despite only 40% of the goods entering the Palestinian territories.
Sela went on to say that he does not know where exactly the merchandise is sold and why this is allowed to happen. The Kohelet Policy Forum and Lavi between them filed three petitions to Israeli courts, demanding that a criminal investigation be opened against those involved, the transferring of funds be halted, and the enforcement of the regulations that exist under the Finance Ministry.
30 years
Following the report, the ministry released a statement on Monday.
“For 30 years, since the Oslo Accords, there was indeed a loophole that allowed the Palestinian Authority to receive about 100 million shekels [about $27.3 million] a year in tax money that should go to the State of Israel. Since Knesset member Avihai Boaron and Kohelet and Lavi raised the issue, the Ministries of Finance and Defense worked to close the loophole, and it was indeed closed,” the Finance Ministry stated.
“The order is ready following public feedback, and in the coming week, after the approval of the Ministry of Justice, the Minister of Finance will sign the order that will require the closing of a circuit in crossings for designated goods and will allow the imposition of guarantees and sanctions on traders who do not go through the organized crossing and who deceive the tax authorities and thus the issue will come to a close,” the statement read.
According to the Protocol on Economic Relations (aka the Paris Protocol) agreements struck in 1994 between Israel and the PLO, containers of goods destined for the Palestinian Authority will be unloaded from ships in Israeli ports, and transported by trucks to the Palestinians.
It was agreed that Israel will collect the import taxes and transfer them to the Palestinian Authority, with the proportion of funds to be transferred from Israel determined by the declared goods of Palestinian importers.
Since 2019, most declared goods intended for the Palestinian Authority never reach their destination, Ynet reported. In 2020, according to the report, Israel transferred 700 million shekels ($190 million) of import taxes to the P.A., and in 2021, the figure surpassed 1.5 billion shekels ($410 million).
Justice Elron was quoted by Ynet as saying, “What advantage lies in making the tax calculations according to [importers’] declarations? Do the goods end up staying in Israel? What’s going on here?”
