Palestinian Authority Prime Minster Salam Fayyad is determined to wean his government off reliance on foreign assistance and tax transfer from Israel – and one way he aims to do that is by collecting more taxes from Palestinians.
Fayyad made his plans clear at an investor conference in Ramallah this week, where he asked businesspeople to voluntarily delay investment tax credits they are entitled to for three years to help the PA pay its bills.
“We are not saying that that the government will rescind these benefits but that the business sector should act voluntarily,” Fayyad said at a conference sponsored by the Palestine Exchange on Monday, terming it a patriotic act. “It’s a message of empowerment for the national economy, to deliver a message that the Palestinians don’t just give speeches.”
The PA is facing a massive cash crunch. Angry that the PA won membership last month in the United Nations Educational, Scientific, Cultural Organization (UNESCO) and that it is now trying to forge a national unity government between the Fatah and Hamas movements, Israel began withholding taxes it collects for the PA that pay for more than two thirds of the PA’s spending.
Meanwhile, foreign donors, facing fiscal crises of their own, have not come through with promised aid while a slowing Palestinian economy has reduced whatever taxes and fees the PA collects.
Fayyad said the PA is also in the process of overhauling the tax code with the aim of increasing collections and making it more progressive by taxing the richer more. On the expenses side, Fayyad is trying to cut the PA’s bloated budget, which pays the salaries for 150,000 state employees serving a population of about 3.8 million.
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