Study: Arabs evade tax payment due to poverty
Ben-Gurion University research suggests low tax payment rate among Arabs not related to national sentiment or poor enforcement, but to considerably lower income of average Arab family compared to Jewish family. One solution: Conditioning municipal services with tax payment
The low responsiveness of Arab citizens in Israel to municipal tax payment is not related to anti-Israeli sentiment or lack of enforcement, a study conducted by Rafik Haj from the Ben-Gurion University suggests. Haj concluded that tax evasion stems from the Arab sector's low socio-economic status. One solution he suggests is conditioning municipal services with tax payment.
The current municipal tax collection rate within the Arab population stands at 18.6% as opposed to 53.7% in the Jewish sector. However, the particularly low collection rate also derives from past debts which are added to the general collected sum. The rate of tax evaders within the Arab population stands at 60%.
The study's findings indicate that the reasons for tax evasion do not relate to the Arab-Israeli conflict and do not stem from alienation to the State. According to Haj, the study also refutes the assumption that stronger enforcement increases tax collection since the rate of those who are deterred by such measures is low.
Haj claims that the low tax payment rate derives from the poor economical state of the Arab population as opposed to the Jewish population. He reached the conclusion that in communities of high socio-economic status the collection rate is equally high and vice versa. His study shows that property tax amounts to 6.9% of an average Arab family's income as opposed to 4.6% of an average Jewish family's one. This, he explains, stems from the fact that the average Jewish family's income is twice as high as the Arab one.
Is the rate of tax evaders of similar socio-economic status the same among Arab and Jewish populations?
"No, in the Jewish population of a similar socio-economic status the collection rate is still higher; however the collection gap between the two sectors is substantially low."
Haj said there are other factors, less substantial, which affect the collection rate, including level of social capital, perceived tax payment rate, level of enforcement, level of satisfaction of municipal services and level of integrity of the local Arab authorities.
What is the perceived tax payment rate?
"The greater the perception of community members of the majority not paying property tax, the more they are inclined no to pay. It's the herd mentality. I also discovered that having many clans within a community leads to low collection rates."
To what extent does the level of integrity among local authority officials affect collection within the Arab population?
"In Arab local councils and municipalities there is a much lower level of integrity in comparison to the Jewish sector. This means that when residents realize that tax payers' money ends up with relatives of officials and political appointments as well as with affairs not concerned with the public welfare, they become less inclined to pay tax."
Reform in tax system needed
The study raises some practical suggestions for addressing the low responsiveness of tax payment within the Arab population. Haj claims that the Arab communities need to cultivate an atmosphere of belonging and commitment to the community which fortifies the "tax payment morale."
He further asserts that a reform needs to be implemented within the municipal tax payment system and should be adjusted to the Arab sector's particular nature. This includes affirmative action for populations in low socio-economic status.
Another solution suggested by Haj is to condition certain services with eradicating debts to the local tax system. "The idea needs to be tested and implemented on both the Arab and Jewish population.
"For example, in Ireland residents buy stickers for garbage cans and if there is no sticker municipal workers leave the garbage where it is. The problem is that as opposed to water and electricity, here there is no on and off button to turn off if the resident doesn't pay."