Financial Crime World

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Occupation’s Grip on Palestinian Economy: A Recipe for Fiscal Disaster

Ramallah - The Palestinian Authority (PA) has been bleeding financially due to the Israeli occupation’s fraudulent activities, according to a recent report by the Civil Society Team for Public Budget Transparency. The study reveals that fiscal leakages and losses have reached staggering levels, with annual losses of over half a billion dollars.

Fraudulent Activities

The report highlights several key areas where the occupation is siphoning off Palestinian revenue:

  • Manipulation of Invoices and Receipts: The Israeli occupation authority handles invoices as if goods were destined for Israel, collecting taxes accordingly. When these goods are re-exported to the Palestinian Territory, the occupation authority only transfers Value-Added Tax (VAT) based on receipts prepared for this final transfer of goods.
  • No Disclosure of Indirect Imports: The Israeli government colludes with Israeli suppliers to deprive the Palestinian treasury of revenue. Recorded Palestinian imports doubled in recent years, with direct and indirect imports from Israel accounting for $3.2 billion. No accurate estimates are provided on goods reimported from Israel, resulting in losses of around $30 million per year.
  • Administrative Fees: The occupation deducts a 3% annual administrative fee on taxes collected on behalf of the PA prior to transferring them to the PA. Since 2019, Israel has started deducting about $52 million under the clause of “estimated or imposed administrative fees”.
  • Poor Tax Clearance Mechanism: The Israeli tax clearance mechanism imposes submission of detailed invoices in terms of quality and quantity, but often falsifies them, leading to customs or tax evasion.
  • Tax Evasion: Estimates suggest that smuggling of supplies from Israel reached $950 million, with external commerce data lacking information on smuggling through customs. Tax evasion accounted for $160 million in 2019 and $152 million this year (16% of the value of smuggled goods).

Recommendations

The Civil Society Team for Public Budget Transparency recommends:

  • Exerting further efforts to emancipate from the Israeli economy and shift towards direct importation.
  • Empowering the Palestinian economy to produce local substitutes to Israeli imports, maximizing benefits of Goods Lists set forth in the Paris Protocol.
  • Connecting electricity grids with neighboring countries.

International Pressure

The team urges Palestinians to:

  • Intensify their efforts in the international arena to mobilize political and diplomatic pressure on Israel, publicizing its repetitive violations of agreements with the Palestinians.
  • Address international organizations such as the World Trade Organization, World Customs Organization, and the Organization for Economic Cooperation and Development to file cases based on Israel’s violations of fair trade principles.

The ongoing occupation has taken a devastating toll on the Palestinian economy, leaving it vulnerable to Israeli manipulation and exploitation. It is imperative that the international community holds Israel accountable for its actions and supports the Palestinian people in their struggle for economic emancipation and self-determination.