Israel continues to control taxation in the Gaza Strip, which forms part of a single customs envelope along with Israel and the West Bank. This means that Israel sets the customs and Value Added Tax rates collected for goods and in so doing influences product prices as well as Palestinian fiscal policy. To illustrate: a merchant in Gaza who purchases clothes from an Israeli manufacturer pays VAT at a rate determined by Israel, and Israel is responsible for transferring this amount to the Palestinian Authority. If the merchandise is imported, Israel sets and collects the customs for it and is responsible for transferring the amount to the Palestinian Authority. The VAT and customs rates set by Israel then affect the price the consumer pays for clothes in Gaza.

Israel continues to collect VAT and customs on behalf of the Palestinian Authority and has the power to decide whether or not to transfer this revenue. As such, Israel controls the Palestinian Authority’s ability to use this revenue to fund public services in the West Bank and Gaza Strip, such as electricity, health care, public service salaries, etc¹.

The exception to the rule whereby Israel controls the collection of taxes and hence the services provided to the Palestinian public is the taxes collected by Hamas on goods entering Gaza from Egypt through the underground tunnels. The volume of goods transferred via the tunnels significantly increased since Israel began restricting the entry of civilian goods to the Gaza Strip in 2007. The government in Gaza collects taxes for some of these goods, such as cigarettes, fuel, and occasionally building materials. For example, the Hamas regime in Gaza sets the tax rate for fuel transported through the tunnels and collects it from the merchants who import the fuel to Gaza from Egypt. In this way, the regime in Gaza influences local fuel prices, which are significantly cheaper than those in Israel or the West Bank. Having some goods transported into Gaza via tunnels rather than the Israeli-controlled crossings and the collection of taxes on these goods allow the government in Gaza to reduce its dependence on Israel for setting tax rates for these goods and for funding public services.

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1. See e.g., GISHA, DISENGAGED OCCUPIERS, supra note 1, p. 56, which provides details of the impact of Israel’s nonpayment of tax revenues to the Palestinian Authority from March 2006 until June 2007, a period in which Hamas presided in the Palestinian Authority along with Fatah and other parties. A similar measure was taken in May 2011, when Hamas and Fatah announced a reconciliation agreement. See: Israel Suspends Cash to Palestinians after Hamas Deal, BBC News (May 1, 2011).

The Rafah border crossing opened last June, following the flotilla incident, after being closed for nearly four years. However, it was closed again in late January, until further notice, due to security concerns in the Sinai Peninsula. While Egypt and the Hamas government administer the border crossing by way of ad-hoc agreements, Israel also exerts partial control of the crossing through its control of the Palestinian population registry (in other words, Palestinians who wish to cross must be listed in the registry administered by Israel). Israel also exercises control through joint security arrangements with Egypt. According to reports in the Palestinian media, approximately 4,000 people are waiting in the Sinai Peninsula for the crossing to re-open so that they can return to Gaza. A number of Palestinian residents of Gaza were also being held at the airport in Cairo, since, according to Egyptian protocol, they can not leave the airport except to go directly to the Rafah border crossing, and this requires a police escort. Other residents of Gaza worldwide are also waiting to return home.

On the Gaza side of the crossing, 300-500 people in need of medical attention are waiting to exit the Strip in order to receive treatment.

Students who returned to Gaza for the vacation cannot return to their schools. Among them is Ahmad, a medical student studying in Egypt. He hesitantly agreed to return home after five years during which he had avoided making the trip, fearing that once in Gaza, he would not be permitted to return to his studies. His worst fears have now come true and he is missing out on his studies while waiting to leave: “We never could have imagined that the source of our problems in returning this time would be instability in Egypt”, he said. The exit of students through the Erez crossing, which is controlled by Israel, is limited to those with a scholarship for study in a “Western” country. So exit through Rafah is Ahmad’s and many other students’ only option. If the opening of Rafah last June indicated a partial solution to the movement restrictions faced by students seeking to study abroad, recent events show how easily this freedom can be undermined.

Petrol station in Gaza. Photo: Mohammed Azaiza, Gisha

Events in Egypt have also led to a rise in the cost of fuel and construction materials in the Strip as a result of a drop in activity in the tunnels and shortages in supply on the Egyptian side. Last week, the price of cement rose by more than 30%, while the price of gravel increased by about 20%. The rising fuel costs were checked following the government’s decision to set a fixed maximum rate, but shortages continue. Since Israel imposed restrictions on the transfer of these goods in 2007 (claiming that this would “weaken” the Hamas rule), the trade in fuel and construction materials has operated through the tunnels, where the Hamas government levies taxes on it. As events calm down in Egypt, tunnel activity is resuming.

Recent events in Egypt illustrate how the closure of Gaza and the dependence it creates on the border with Egypt make freedom of movement in Gaza as vulnerable as a leaf blowing in the wind.

]]> http://www.gazagateway.org/2011/02/meanwhile-in-gaza/feed/ 2 http://www.gazagateway.org/2011/02/a-different-kind-of-power-struggle/ http://www.gazagateway.org/2011/02/a-different-kind-of-power-struggle/#comments Thu, 03 Feb 2011 08:46:02 +0000 admin http://www.gazagateway.org/?p=1882 Continue reading →]]> Those following the weekly charts on Gaza Gateway might have been surprised to discover that the amount of industrial diesel transferred from Israel to the Gaza Strip has been nil for some weeks now. The fuel, needed to operate Gaza’s power plant, is usually transferred via the Kerem Shalom crossing, though lately, you would only find its low grade cousin, regular diesel, coming in through the tunnels in the Rafah area in the southern Gaza Strip, from Egypt and via coordination with the Gaza government, which collects taxes on it. The change of transfer point did not occur overnight but rather as a result of a, by now, three-year policy on the part of Israel and recently given a stamp of approval by the Turkel Commission, to reduce the transfer of industrial diesel to Gaza. The change also came about as a result of a funding dispute between the Palestinian Authority in the West Bank and the government in Gaza which caused suppliers to seek out more cost efficient methods to supply the fuel.

The transfer of diesel through the tunnels reduces the electricity shortage in Gaza but does not resolve the problem. The power plant still needs industrial diesel, which is mixed with regular diesel coming from Egypt in order to reduce the amount of sulfur emitted from the production process. In these new circumstances, power outages have shortened but still occur for an average of six hours a day, posing hardship for Gaza residents. True to today, the plant is producing about 60 MW of energy, while the total electricity deficit in the Strip stands at 80 MW.

As far as underground economies go, the Egyptian channel is not reliable. Last week there was a drop in transfer of goods from Egypt due to recent events there, casting doubt on the stability of the diesel supply to the Gaza power plant. When the tunnels are operating, the government in Gaza coordinates the transfer of fuel and collects taxes on it (NIS 0.60 per liter of diesel that costs the merchants bringing it in less than one shekel). Based on these figures one can only wonder about the conclusion of the Turkel Commission, which legitimized Israel’s restriction on diesel transferred to the power plant, stating that these restrictions were an instrument to promote Israel’s military objective of harming “Hamas’s capacity, including its military capacity, to continue attacking Israel”.

Not only has the closure of Gaza failed to protect it from the virus, but the restrictions on the passage of equipment and fuel are making it difficult to contain the virus’s spread.

During the military operation last winter, 15 hospitals and 34 medical institutions were damaged, and their repair has not been possible due to Israel’s refusal to allow building materials into the Gaza Strip. While Israel boasts of permitting increased quantities of humanitarian aid to Gaza, it continues to restrict the entrance of medical supplies, claiming security risks. Thus, Israel is making it difficult to send batteries needed for the UPS systems that protect sensitive hospital equipment during the frequent power outages and is limiting the supply of additional medical supplies, such as X-ray equipment.

The Swine Flu, however, known for its tendency to breach borders, is not treated like other illnesses, and Israel has allowed 6,000 vaccinations purchased by the Palestinian Ministry of Health in Ramallah into Gaza. The vaccinations are destined for Gaza residents who participated in the pilgrimage to Mecca (the Hajj) and for the medical professionals treating patients diagnosed with the virus. It is estimated that more than 400,000 vaccinations are needed for people in high risk groups.

Allowing vaccinations through to Gaza residents is surely a nice public relations photo opportunity, but preventing the outbreak of an epidemic requires appropriate sanitary conditions and infrastructure, too. Frequent and extended blackouts (8 hours a day, 4 days a week), due to Israel’s refusal to allow the transfer of the required amount of industrial diesel to the Gaza power station, interfere with the proper functioning of local hospitals. Hospitals rely on back-up generators during the power outages, but limitations on their power production interferes with the heating and ventilation systems that are vital for maintaining proper air-pressure.  Likewise, the ongoing shortage of gas limits the ability to run hospital washing machines needed for basic hygiene. This past week, only 34% of the gas needed by Gaza residents was supplied (518 tons out of the 1,500 tons needed per week).

Other types of infrastructure systems which are needed to deal with infectious diseases are the sewerage and water purification systems, which also rely on fuel and supplies limited by Israel. A roof over the heads of the thousands of residents uprooted from their homes and the hundreds still living in tents since their homes were destroyed in the war is another basic requirement.

Some people resort to prayer to protect them from the Swine Flu. We would make do, for starters, with policies that allow the ongoing transfer of equipment required for sanitation and the proper functioning of the health system – out of respect for the rights of the 1.5 million people who live in the Gaza Strip.

In this week’s post we provide context for the MFA’s (mostly) correct numbers.

Israel’s policy in the Gaza Strip: Permit the entrance of humanitarian aid ONLY – no development, no prosperity, no economic activity.

Food: No luxury, no production

True: “All food products are brought into the Gaza Strip, except for those that definitely constitute luxury items”.

More true: Did you know that honey and canned fruit, which have been banned since the beginning of the closure, definitely constitute luxury items? Or that, for 8 months, tea definitely constituted a luxury item, until it was suddenly permitted into Gaza about two months ago, indicating that maybe it is not a luxury item after all? On the other hand, pasta is definitely not a luxury item anymore, since Secretary of State Hillary Clinton expressed concern about obstacles to the entrance of aid in February. Margarine in small packets is not a luxury item, but margarine in large buckets is definitely a luxury item, because it could then be used as a raw material for local food production, giving Palestinian residents of Gaza the luxury of engaging in productive work.

There are no published lists of what kinds of goods can and cannot enter, and Israel has refused to explain which products constitute a luxury, and which don’t. Without some kind of list – how are we to know?

Unemployment: Revealing all the numbers

True: Unemployment in Gaza dropped from 45.5% in the second quarter of 2008 to 36% in the second quarter of 2009.

More true: According to the Palestinian Central Bureau of Statistics, the reason for the second quarter drop in unemployment may have been that temporary relief projects, especially for clearing rubble after the military operation, were initiated by international organizations and the local government. The MFA neglects to mention that in the third quarter of 2009 unemployment again rose to 42.3%, as these temporary relief projects ended. Compare this with 32.3% unemployment in June 2007, just before the closure began.

Fuel and electricity: Not meeting needs

True: Israel meets the minimum threshold set by the Israeli High Court for the passage of industrial diesel for electricity production at the Gaza power plant.

More true: The minimum threshold for industrial diesel set by the court is far below what Gaza needs. In fact, the industrial diesel that was transferred in the month of November met just 39.1% percent of needs, creating power outages.

Re-building projects: A drop in the bucket

True: “Israel is conducting discussions with the Palestinian Authority, the US, EU representatives in the area and others, with the aim of establishing an agreed-upon supervisory mechanism, subject to international standards, which will ensure, if and when a decision is made to that effect, that monies, materials and equipment that are brought into the Gaza Strip for vita humanitarian projects actually reach their destinations”.

More true: Israel has refused to allow reconstruction materials to enter Gaza, despite “discussions” that have taken place over the past 11 months. Gaza needs at least 25,000 tons of iron and 40,000 tons of cement for reconstruction. Since the war, Israel has blocked all but 19 trucks of construction materials permitted to enter on an exceptional basis for the humanitarian infrastructure (i.e. water and sewage systems), though restrictions on other materials mean that infrastructure continues to function below capacity (see below). Without reconstruction materials it is impossible to rebuild the more than 3,500 homes destroyed and the approximately 56,000 homes damaged, in addition to over a thousand businesses, factories, and other commercial establishments destroyed and partially damaged during the war. Even if construction materials were permitted in to fix the estimated $45 million in damage to private sector establishments, the ban on import and export ensures that these businesses would likely lay idle, as 97% of factories generally have done so for over two and half years. Some cement enters via the tunnels beneath the Gaza-Egypt border, but prices are beyond the reach of most residents, and many international organizations are restricted from using these materials.

Water, Sewage and Electricity Infrastructure

True: “Israel is conducting a dialogue with Robert Serry, special emissary of the UN Secretary-General, regarding vital humanitarian projects, primarily relating to sewer systems”.

More True: Dialogue notwithstanding, Israeli restrictions on supply of spare parts and materials for the devastated water and electricity systems mean that 10,000 people are without running water, 40,000 people are cut off from electricity, and power outages lasting 8 hours, four times per week are a common occurrence in most homes.

Education: Children paying the price

True: UNRWA schools recently received shipments of education materials, including notebooks and pencils.

More true: UNRWA is the only agency permitted to receive school supplies in Gaza, and only after Israel delayed the entrance of these items for several months. Israel continues to ban the entrance of supplies for two-thirds of the schools in Gaza, the private and government-run schools which educate 240,199 children.

The final section of the MFA newsletter includes a quote by EU Special Representative to the Middle East, Marc Otte. Find here another important statement made by Marc Otte recently in an interview for Al Quds newspaper, describing the EU position on the closure:

“[The] Gaza closure and denying entry to construction materials is morally unacceptable and is a failure. I was in Gaza last week, there were large quantities of cement in Gaza, but the only people who do not get it are the ones who most need it. For this, ban on constructions materials is not acceptable and I have explained this to the Israelis and told them that this is also not in their interest. Our position is clear, especially that winter is coming, and people can not live in tents in the cold and under the rain”.

Post-script: a perceptive reader pointed out to us that in a November 24^thbriefing to the Security Council, Assistant Secretary-General for Political Affairs Mr. Haile Menkerios, made comments in reference to the stalled Serry Plan mentioned in the MFA newsletter:

“Beyond immediate humanitarian needs and the water and sanitation sector, I regret to inform the Security Council that the United Nations has not yet received a satisfactory response from the Israeli government to the proposal, put forward in May, to complete $77 million of stalled UNRWA and UNDP projects in the area of housing units and school and health facilities. The UN has left no stone unturned in seeking approval of this package in extensive consultations with the Israeli authorities, and is confident of its capacity to ensure the integrity of programming. It is completely unacceptable that no meaningful progress has been made in kick-starting UN civilian construction activities essential for the well-being and recovery of a war- and blockade-affected population, half of whom are children”.

The other crossings have also been closed: Karni Crossing, which was the main trade route, has been closed since June 2007, and only one conveyer belt, used to transport produce and animal feed, has continued to operate on a partial basis since then. The Sufa crossing has not operated since September 2008 and Israel announced its permanent closure in March 2009. The transfer of goods via the Rafah crossing is prohibited. And so all of Gaza is now almost totally dependent on the Kerem Shalom crossing, which has limited capacity and was originally designed for the occasional transfer of humanitarian aid only. Now Israel apparently plans to burden Kerem Shalom with fuel and gas transports as well.

Of course, in response to rocket fire from the Gaza Strip, Israel occasionally closes Kerem Shalom too, due to what it identifies as dangers to the crossing.

The possibility that security risks would threaten the opening of Gaza’s crossings was the subject of considerable forethought. As a result, three fundamental conditions designed to ensure that the Gaza Strip crossings would operate continuously were established and agreed to by Israel:  (1) Recognition of the need to operate alternative lanes (lane redundancy); (2) recognition of the need to operate alternative crossings (passage redundancy); and (3) the primary objective which Israel committed to in the Crossings Agreement: the principle of continuous operation.

It is hard to imagine how one crossing, consisting of only one primary lane, can fulfill these fundamental conditions.

Meanwhile, Israel continues to strike against the tunnels underneath the Egypt-Gaza border, via which the majority of goods required by Gaza residents are transported, including by blowing them up.

Under these circumstances, with the sea and air routes completely blocked, the tunnels rejected as a legitimate option, and the overland crossings increasingly shut down, how exactly are the residents of Gaza supposed to get the goods they need?

Maliha, who holds a Doctorate in Mechanical Engineering from the Middle East Technical University in Turkey, has worked in various positions in the electricity sector in Gaza over the past 14 years.

“Originally, the Gaza Power Plant was designed with an output capacity of 140 megawatts of electricity,” he explains. “Throughout its years of operation, the plant’s maximum output level was 118 megawatts. That was in 2006, just before Israel bombed the power plant and destroyed all six transformers”. 

Since then the damage has been partially repaired, but another problem has arisen: Since November 2007, Israel has restricted the transfer of industrial diesel to the Gaza Strip. This diesel can only be used to operate a power plant and it is paid for by the European Union. Thus, a power plant that requires 3.5 million liters per week has been forced to operate on 2.2 million liters per week – 63% of the necessary amount. This causes power outages lasting 6-8 hours, four days a week, with which Palestinian residents of the Gaza Strip must contend.

 “Throughout the month of Ramadan we worked differently,” explains Maliha. “Since it was very hot and the peak consumption and shortage hours were in the evening – due mostly to cooking – we used up reserves of industrial diesel which we accumulated beforehand in order to ease the impact of the shortage on the residents”.

Immediately after the conclusion of the month-long festival, he explained, the power plant was forced to return to its previous level of operation, due to a supply of industrial diesel sufficient to generate only 55-60 megawatts of electricity.

 “What do I need most?” he asks rhetorically, “I need fuel. And also spare parts. We have no other alternative”.

How does he view the future? “It’s hard to look ahead and make plans. Even if we had a plan, we wouldn’t be able to carry it out due to the restrictions. It’s a complicated situation. Right now we are just taking things one week at a time”.