No Tax Increase for Palestine, Despite Dropping Aid Levels

February 2, 2012 Taxation in Palestine

No Tax Increase for PalestinePalestinians do not want to see raised rates for income taxes, and prefer to address the government’s budget deficit through a reliance on foreign aid.

In the face of intense public pressure, on January 31st the Prime Minister of the Palestine National Authority Salam Fayyad scrapped the government’s proposal to raise income taxes in Palestine.

According to a recent research by local analysts, only 12 percent of Palestinians currently support the government’s proposal to double the rate of income tax to 30 percent. Amongst other measures to reduce the budget deficit, the government has also proposed including a greater number of business and operations in the tax net, and actively cutting government spending. The combined measures were expected to raise approximately USD 450 million in extra tax revenues per year.

The results of the survey also indicated that for nearly 54 percent of Palestinians further increases to foreign aid and assistance remained the preferable option to address the government’s financial struggle. The current budget for the 2012 year stands at USD 3.5 billion, with approximately USD 1 billion covered by foreign aid, and with estimated tax revenues of approximately USD 750 million, resulting in a budget deficit exceeding USD 1.1 billion.

Palestine is currently seeing its foreign aid revenues dwindle, as some foreign governments deliver less aid than Palastenian authorities requested. In 2011 less than USD 750 million of foreign aid payments were made to Palestine, while the government budgeted for over USD 1 billion.

Photo by mozzoom

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