Israel, PA ink first economic deal since 2002
Minister Steinitz, Palestinian PM Fayyad agree to broaden economic cooperation and improve collection of taxes on goods
Finally, after a decade a ministerial economic agreement has been reached between Israel and the Palestinian Authority. Minister of Finance Yuval Steinitz announced Tuesday that he has reached an understanding with Palestinian Prime Minister Salam Fayyad about broadening economic cooperation and improving tax collection on goods which reach the PA via Israeli ports.
The agreement includes four major understandings between the two parties.
First, it has been agreed that there's a need to set up a pipeline to transport fuels directly from Israeli ports to the PA. Currently fuels are transferred by trucks.
Additionally, two steps will improve the collection of customs tax and VAT on goods which reach the PA via Israeli ports. Today, VAT and customs tax on goods are collected at the ports and the money is later transferred to the PA.
After tax collection, goods are transferred by trucks to PA border checkpoints, yet some of the merchandise is taken off the trucks and stays in Israel.
The PA suffers since it does not receive the goods and Israel suffers since taxes are transferred to the PA yet the goods remain on Israeli soil.
The new agreement specifies that some of the goods will arrive in Israeli ports in containers sealed by electronic locks which can be monitored even after opening. The containers will leave the docks prior to tax collection which will take place only after they reach the PA.
Additionally, as of 2013 Israel will transfer customs and VAT payments to the PA only for goods which passed from Israel to the PA via the border checkpoints. Today Israel transfers payments on all goods which were declared to be en route to the PA. These goods, as mentioned, sometimes remain in Israel. It has also been agreed that the two parties will share information regarding goods transfer and tax collection in order to eradicate smuggling and tax evasion on both sides.
The agreement is the fruit of covert negotiations which took place in recent months between the Israeli team led by Director General of the Tax Authority, Doron Arbeli, his assistant Uri Bruck and Yuval Wollman, economic adviser to the Minister of Finance and the Palestinian team led by Nabil Kassis Minister of finance and Accountant General Yousef Al-Zumor.
It began with a phone call between Steinitz and Fayyad, in June 2011 .This led to negotiations mediated by Prime Minister Netanyahu's delegate, Attorney Yitzhak Molcho.
"It's an important step in strengthening economic ties between Israel and the PA," said Steinitz on Tuesday. "The cooperation will aid both sides in fighting tax evasion, increase the PA's income from tax collection, and help cut down on smuggling of goods. This move is an important step in the newly declared war on black capital and tax evasion."
Fayyad said in regards to the agreement that he's "convinced the agreements we reached will help strengthen the economic foundation of the PA by promoting the development of a tax infrastructure in the PA and broadening tax collection."
