Israel has intensified its war on everything Palestinian, especially the economy, by enacting a number of legislations, with the economy of Gaza and the West Bank linked to the occupation through multiple factors, including understandings with the Palestinian Authority and the blockade.
A recent study indicated that new Israeli laws and legislation were issued in the period following the Al-Aqsa Flood operation and Israel’s war on Gaza on October 7, 2023, which greatly affected the Palestinian economy, including issues related to taxes, employment, social aid, and settlement expansion. These are areas that have a direct impact on the Palestinian economy due to the existing intertwining between the Palestinian and Israeli economies.
It is expected, according to the study prepared by Dr. Raghad Azzam, a researcher at the Vision Center for Political Development and a specialist in Palestinian economic affairs, that the effects of these amendments on the Palestinian economy will differ in the West Bank compared to the Gaza Strip.
UNRWA ban law
The researcher stated in her study that the Israeli occupation’s decision to ban the work of the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) last October in the occupied territories will exacerbate the social and economic challenges as a result of the cessation of its services. In the West Bank and Gaza Strip, more than 340,000 students benefit from education in the Agency’s schools, and the number of beneficiaries of UNRWA health services is estimated at more than 4 million.
The study expected that banning UNRWA would lead to an increase in the need for humanitarian aid from other sources, as UNRWA’s budget reached $345 million in 2023, which was directed to support Palestinian refugees, and UNRWA has 30,000 employees, most of whom are Palestinians.
Tax deduction for workers
One of the provisions of the Economic Arrangements Law for the Occupation Budget for the year 2025 stipulated the cancellation of the tax deduction that foreign and Palestinian workers enjoyed, as Palestinian and foreign workers who work in the occupied territories receive some deductions related to income tax, similar to Israeli workers, and based on certain considerations such as residency and age. Family status, gender, etc.
The occupation government expected that the decision would increase tax revenues by about 410 million shekels ($113 million) during the year 2025. The Israeli government thus seeks to raise its tax revenues and attempt to fill the deficit in the government’s budget resulting from the war on Gaza and its repercussions.
The occupation government determines the value of income tax deductions at the beginning of each tax year, according to the change in the consumer price index from the previous year. In 2024, the size of the income tax deduction reached 242 shekels ($64) per month (meaning that the worker who receives a tax deduction will pay tax His income is $64 less than others without a tax deduction).
According to the study, canceling this deduction will increase the burden of taxes imposed on this category of Palestinian society and reduce their income, and this coincides with the restrictions imposed by the occupation since October 2023 on the entry of Palestinian workers to work in the Israeli market.
According to the latest labor data from the Palestinian Central Bureau of Statistics, the number of Palestinian workers in the occupied territories and settlements decreased until the second quarter of 2024 to about 27 thousand, after this number had reached about 200 thousand workers before October 7, 2023. Which increased unemployment in the West Bank.
Under the Paris Protocol, 75% of the income tax imposed on the funds of Palestinian workers working inside the occupied territories is transferred to the Palestinian Authority, while the occupation retains 25% of these funds under the pretext of covering the costs of administration and services related to tax collection. As for the revenues of workers who work in the settlements, it stipulates Paris Protocol to transfer it completely to the Palestinian Authority.
Freezing Palestinian Authority funds
This clause comes within the “Anti-Terrorism Law” approved by the Israeli Knesset in 2016, which includes hundreds of clauses that have been expanded, the most important of which was granting the authority to the occupation government to review and estimate the funds that go to the families of Palestinian prisoners and martyrs who participated in commando operations against the occupation, and to deduct Amounts of money from the clearance funds before handing them over to the Palestinian Authority.
The size of the deduction increased from $187 million in 2022 to $477 million in 2023, according to the study.
Following October 7, 2023, the occupation issued a decision to freeze all Palestinian funds collected as tax revenues (clearance) for the Palestinian Authority. About 789 million dollars were frozen, claiming that the Palestinian Authority used these funds to support “terrorism” by paying prisoners’ salaries. And the martyrs.
After a settlement was reached requiring the transfer of the seized clearing funds to the State of Norway, which acts as an intermediary that guarantees the destination of these funds to the Palestinian Authority, the occupation returned and backed down after Norway recognized Palestine as an independent state.
In March 2024, the Knesset passed a law allowing Israeli families affected by resistance operations to file lawsuits against the Palestinian Authority and demand compensation amounting to about $2.7 million for the family of each dead person.
Accordingly, last November, the occupation court in occupied Jerusalem ruled obligating the Palestinian Authority to pay $12.5 million in punitive damages, funeral costs, and legal expenses to the families of three people killed in the Sparrow operation that took place in 2001, and the authority was given until the end of this December. To pay compensation, otherwise it will be deducted from the clearance funds held by the occupation.
Annexation and settlement expansion
The study indicated that, as part of a series of Israeli measures aimed at expansion in the West Bank and Gaza Strip, new Israeli legislation was passed in November 2024, granting the Israeli government fines collection center the right to collect fines imposed by military courts on Palestinians residing in the West Bank and Gaza Strip.
She stated that this law is part of Israeli measures aimed at increasing financial pressure on individuals and families affected by military provisions, and it also reflects an expanded approach that uses legal means to enhance administrative and economic control in areas of the Palestinian Authority.
Stopping social benefits
The Israeli Knesset issued a new law aimed at stopping the disbursement of social benefits to individuals and families living in the West Bank and Gaza Strip if they are proven to have participated in activities considered “terrorist” according to Israeli laws. These social benefits are estimated at approximately $1.9 million. This law aims to deprive some groups that were You benefit from the social allowances provided by the Israeli National Insurance Institute, including:
- Former workers from the Gaza Strip who contributed to the National Insurance System during their work in Israel.
- People who became disabled as a result of their work in Israel and obtained legal compensation.
- Minors under the age of 18, whose parents hold Israeli citizenship or residency, but reside in the West Bank or Gaza Strip.
According to the study, the law is an additional step within a group of legislation that aims to strengthen punitive measures against those whom the occupation accuses of participating in “terrorism.” Thus, it reduces the financial burden on them on the one hand, and on the other hand takes advantage of the poor economic conditions of the Palestinians so that this constitutes a deterrent. For any resistance action.
The study concluded that recent developments indicate an Israeli strategy to put economic pressure on the Palestinians to undermine their ability to withstand, which led to a deterioration in the economic situation in the West Bank and Gaza Strip.
