By: Firas Taweel
Settlement agricultural production in the West Bank constitutes the lion's share in Israeli agricultural exports to EU countries
Exclusive to Environment and Development Horizons (Afaq magazine):
Successive Palestinian governments have long chanted slogans to support and steadfast farmers in their land, to protect them from the ghoul of settlements, and to encourage one of the most neglected productive sectors. However, these trends remained within showcasing, especially as the share of agriculture in the budget of the Palestinian Authority does not exceed 1%, while this sector contributes about 4% of GDP. Not only that, but the Palestinian farmer finds himself forced to leave his land, under the weight of Palestinian policies that neither incentive to him to stay nor to compete with the Israeli products subsidized by the occupation government.
Since the 1960s and the 1970s, the agricultural sector (both flora and fauna) has been an economic suitor for Palestinians, contributing at least 40% of the GDP. Over the past 40 years the sector has been fighting a battle that led to its deterioration. For example, animal husbandry sector indicators fell to 3.6% in 2016. According to Union of Agricultural Work Committees, there were 1.5 million sheep and goats at that time, but the number has halved in recent years.
The agricultural sector has been the largest employer of the labor force, with 100,000 workers before 1990, or 45% of the workforce in the agricultural sector, compared to less than 10% today. In fact, hundreds of families lost their livelihoods, which affected the food security of the Palestinian citizen.
Of course, it is not possible to ignore the occupation policies of confiscating lands, especially area C, which constitutes 61% of the West Bank. In the past, livestock farmers had access to nearly 2 million dunums of pastoral land, compared to 500 dunums nowadays, due to the increase in settlements, and the accompanying climate change, drought, reduced pasture productivity, disease outbreaks, smuggling from Israel, the PA’s inability to control the crossings, and the resulting disruption of the supply and demand equation. All those led to the farmer’s inability to compete with the Israeli farmer who enjoys all sorts of support and encouragement.
On the other hand, the policies of the Israeli Occupation tilted the scale in favor of the Israeli settler; while the Palestinian farmer was left without any support or encouragement. On the contrary, he found himself stuck between the tightening of the two jaws of pliers: the occupation, and the Palestinian tax policies.
The Palestinian economy relies on the tax system as an alternative to funding. The PA has pursued a policy of increasing tax revenues, which come from two main sources: direct taxes, namely income and property taxes; and indirect taxes, namely value-added tax (VAT), purchase tax, and customs duties. The highest revenue comes from indirect taxes. However, the PA has little power to amend or develop VAT, purchase tax, or customs taxes imposed on Palestinian goods and imports through Israeli ports and borders. On the other hand, according to economist Nasr Abdel Karim, the PA has full authority to amend the income tax system, both for individuals and for companies. The tax revenues accounted for 91.5% of the total revenues of the PA in 2015, meaning it is entirely dependent on the Palestinian taxpayer to finance its activities and expenditures.
Tax Exemption, But!
The local VAT, which applies to all goods and services consumed by the citizen, is the biggest challenge for farmers, because it causes an increase in the cost of production. The burden of paying this tax falls on the final consumer of the product or the service.
It is calculated, after deducting the production input and sales taxes, and collected from companies and individuals registered in the tax departments. The result: small farmers, who are not registered in the tax departments, will end up bearing the burden of this tax as well, because of the greed of traders and the lack of protection of the prices of agricultural inputs.
As a result of community mobilizing and heightened farmers' demands, farmers were exempted from income tax in accordance with the Decree Law No. 14 of 2016 amending the Decree Law for Income Tax No. 8 of 2011 and its amendments, which stated that farmers are fully exempted from income tax on net profits, and that agricultural companies are exempted from income tax on the first NIS300,000 of income tax. However, despite exempting the Palestinian farmer from paying income tax, he still faces challenges pertaining to tax refunds, and increasing costs of production.
Often, the conditions for opening a tax file do not apply to small farmers. This leaves them at the mercy of merchants, in terms of prices of the production supplies. Farmers end up paying the tax on such supplies directly to the merchants, whom calculate the tax as part of the final agricultural input price. This leads the majority of small farmers to refrain from opening tax files.
Livestock Farmers Are Not Exempted
Livestock farmers are not included in the exemption, thus are obliged to pay 16% VAT. Since 83% of Palestinian agricultural holdings are small holdings of less than ten dunums of land per holding, according to agricultural engineer Saad Dagher, the majority of farmers find themselves outside the benefit of tax refunds, which primarily benefit large corporations and large farmers.
Tax refund means the reimbursement or re-collecting of the amounts added to the costs of the purchased materials, called VAT, which is added to the inputs of agricultural production, such as fodder, veterinary medicines, pesticides of all kinds, and buildings and equipment. This VAT is paid to the customs and tax departments at the Palestinian Authority, via Israeli clearing bills.
Aref Daraghmeh, an activist in the northern al-Maleh area in the Jordan Valley, says around 400 farmers in his area are struggling, in terms of tax refunds, because of what he describes as complex procedures. He appeals to exempting livestock farmers from taxes on fodder and other production inputs, especially those farmers from threatened areas such as the Jordan Valley.
Rafi Thaher Abu al-Tayeb, Assistant Director General of VAT at the Ministry of Finance, responded that the exemption is not legal and requires an amendment to the tax laws in-force. He explained that the instructions he has allows him to give refunds to farmers in the vegetation sector, only if they open tax files and provide the necessary invoices.
He demands to educate farmers to register at the tax departments to benefit from the tax refund, which is a forty-day period. Abu Tayeb pointed out that in 2017 the value of tax refunds to farmers in the vegetation sector amounted to NIS13.6 million, and in 2018 it reached 11 million. As for livestock farmers, they are not entitled to a refund under a 2011 decision that overturned a previous decision that allowed them to get VAT refunds. Therefore, livestock farmers are now subject to this 16% tax.
Engineer Omar Titi, coordinator of livestock programs in the Union of Agricultural Work Committees, considered that this policy limits the development of the animal husbandry sector, and leads to reluctance by farmers to continue in this profession, opening the door to further deterioration. He calls for revising the general policies in this sector. Instead of insisting on taxes, Titi said, investment should be opened in this sector, because any investor who wants to enter the livestock sector thinks a thousand times, and takes into account the risks and tax policies that limit progression. "The main point is to revise all laws and reduce, or even abolish, taxes on agriculture. If the government intends to, within an hour laws will be amended for the benefit of livestock farmers."
Government Intervention is a Necessity
The officer of Tubas governorate in the Jordan Valley, Mo’taz Bsharat, agreed with Eng. Al-Titi, saying that the government could relieve farmers by exempting them from taxes on fodder and other production inputs in order to enable their steadfastness in an area subject to systematic land theft policies.
Faced with this situation, the Palestinian government must sense the danger, and step out from the circle of slogans to the real square of action, through real policies that encourage farmers to stay, and push those who abandoned the land to return to it. The Jordan Valley in specific is facing a real war by a colonizer who has spared no effort in land confiscation, building settlements, and employing restrictions on the Palestinian people. Data from Tubas governorate indicate that there are 11 agricultural settlements that enjoy all kinds of support and incentives, in order to kill any competition that the Palestinian farmer might think of. Moreover, the occupation has confiscated 151 thousand dunums in the past two years, and continues to establish camps and expand its military training in order to gnaw more land. So, are we going to we wake up before it is too late?
Translated by: Carol Khoury