Tax Revenues Are Being Counted in the Tunnels

Israel‘s declared objective: Political — to weaken (or overthrow?) the Hamas government in the Gaza Strip.

The means: Economic warfare: “The transfer of goods into the Gaza Strip will be restricted“. 

Implementation: Erasing the customs code ascribed to the Gaza Strip from the computer system of the Israeli Customs Administration and forbidding the import of any goods that are not defined as “humanitarian”.

The significance: Gaza is closed to the import of goods. Theoretically, goods exempt from customs (such as goods from the West Bank and Israel) could be imported, but in practice Israel does not allow the transfer of goods that are not humanitarian.

Consequences: The business sector that existed in Gaza on the eve of the closure in 2007 is precluded from importing raw materials and commercial goods, and the Palestinian Authority cannot collect on the taxes that would be imposed on these goods. Not to mention that 1.5 million people are suffering from a punishing closure, which severely limits their access to goods and to employment options.

And meanwhile in Gaza: The emergence of a “parallel market” in the form of approximately 1,200 tunnels, through which more than 4,300 kinds of items are imported (as opposed to the few dozen items which Israel allows in). Recently, the Hamas government took another step to institutionalize the tunnel economy when it decided to impose official taxes on some of the goods transferred through the tunnels, in addition to the taxes already imposed on those who apply for licenses to dig and operate tunnels.

Indeed, despite indications that the Hamas government is facing a cash flow problem and has even confiscated money, the public service sector in Gaza is now estimated to employ and provide a source of income for 30,000 workers and an estimated 180,000 family members who are sustained, among other things, by the taxes that the government collects in Gaza, including from the tunnel industry. And thus a new business class has emerged in Gaza, fast becoming wealthy from the tunnel economy.

So who, then, is Israel actually weakening?