The Finance Ministry of the Hamas movement in the Gaza Strip imposed a 16.5% tax on West Bank products entering Gaza as of May 22. The tax was imposed on 24 products, including bottled mineral water, soft drinks and entertainment products.
The decision will further increase the already high prices of these products for the residents of the besieged enclave, amid the deteriorating economy due to the ongoing Israeli siege and repeated Israeli wars, and a poverty rate of up to 70%.
The minister of national economy in Ramallah, Khaled al-Aseeli, said in a statement May 23 that the taxes imposed by Hamas on products coming from the West Bank to Gaza are “illegal and not permissible within the same nation.”
Hamas’ decision also raised the ire of civil and human rights institutions in Ramallah and Gaza. The Private Sector Coordination Council in Ramallah, which includes several private sector institutions, denounced the new taxes in a statement May 24. “These measures would fuel the division and undermine the Palestinian economy. It would impose additional burdens on the economy and the Palestinian citizens and would negatively affect their steadfastness and survival,” the statement said.
In turn, the head of the Independent Commission for Human Rights, Jamil Sarhan, decried the measure in a Facebook post May 22, describing it as “a violation of Palestinian law, and a breach of the most basic rules in the relationship between parts of the same homeland.”
Sarhan further urged the executive authorities in the Gaza Strip to rescind this decision and hold those responsible for its issuance and implementation to account.
Rami al-Jabari, a merchant who supplies al-Jebrini dairy products from the West Bank to Gaza, told Al-Monitor, “At this time Hamas is not allowing West Bank products to enter Gaza before paying the new tax. The Palestinian Authority [PA] collects the value-added tax [VAT] once, before the products leave the West Bank. [Under the new measure], the Hamas movement ruling the Gaza Strip is collecting this tax again when the products enter the enclave. Merchants are now forced to pay this tax twice.”
He said, “This is absolutely illegal, and will further raise the prices of products to consumers in the Gaza Strip who are already living under dire economic conditions.”
Osama Nofal, director general of the Planning and Policy Department at the Gaza Ministry of Economy, denied that the authorities in Gaza fabricated any new taxes on Palestinian products. He told Al-Monitor, “The newly imposed tax is the 16% VAT, which is a legal tax imposed on locally produced goods and services.”
He explained that the authorities in Gaza were not collecting these taxes on West Bank products imported to the Gaza Strip in the past, but they started doing this now. “The Ministry of Finance in Ramallah has been collecting the same tax since 2007 on all products imported from the Gaza Strip to the West Bank, with a tax value of $60 million per month. Meanwhile, the tax invoices issued by the authorities in Gaza were not recognized,” he said.
Nofal noted that the Ministry of Finance in Ramallah went too far in its discriminatory tax policy against the Gaza Strip. “On March 14, the PA decided to exempt flour imported to the West Bank markets from VAT, except for the flour supplied to the markets of the Gaza Strip.”
On May 15, the price of a bundle of bread in the Gaza Strip rose from 7 Israeli shekels to 8 shekels ($2.10 to $2.40). In addition, the weight of the bundle was reduced from 3 kilograms (6.6 pounds) to 2.6 kilograms (5.7 pounds). The Ministry of Economy in Gaza argued that this move was due to the fact that the flour tax exemption decision issued by the Ministry of Finance in Ramallah excluded flour companies and mills operating in the Gaza Strip.
Nofal explained that Ramallah’s fiscal policy against the Gaza Strip forced the Ministry of Finance in Gaza to implement a policy of reciprocity, and to collect the VAT on West Bank products imported to Gaza.
The ideal solution to this problem, according to Nofal, is for the Ministry of Finance in Ramallah to commit to collecting taxes on West Bank products imported to Gaza only and without Hamas collecting this tax again, and for the Ministry of Finance in Gaza to commit to collecting taxes on Gaza products imported to the West Bank only without the PA collecting it again.
This solution, he argued, “solves the problem of duplication of taxes and will lower prices of products for consumers.”
Samir Abu Mudallalah, professor of economics at Al-Azhar University, told Al-Monitor, “Since the Palestinian division in 2007, there has been conflicting tax laws between the Gaza Strip and the West Bank, which created a policy of double taxation. Both sides of the Palestinian division — Hamas in Gaza and the PA in the West Bank — collect the same taxes on goods exchanged between the two territories.”
He said that the Palestinian citizens are the most affected by this duplication. “This refutes the claims made by the two parties [Hamas and the PA] that they are keen on supporting the local product, and reduces the chances of economic development,” he noted.
However, Mohammed Abu Jiyab, editor of Al-Eqtesadia newspaper in Gaza, said that Hamas' new tax will have a positive impact on the production wheel in Gaza. “Levying VAT on West Bank products imported to Gaza will raise their prices to consumers, rendering cheaper the products manufactured in Gaza,” he told Al-Monitor.
He explained, “Consequently, citizens will prefer the products of Gaza over the products of the West Bank, boosting local production and increasing the workforce in Gaza’s factories therein.”
Meanwhile, the unemployment rate in the Gaza Strip has climaxed to 50%, according to a report issued by the Palestinian Central Bureau of Statistics in September 2021.