Figures released by the Israel Tax Authority reveal that in recent years, Israel has failed to properly validate manifests of imports it processes on behalf of the Palestinian Authority, resulting in billions of shekels being paid to Ramallah without justification, including 1.5 billion shekels ($411 million) in 2021 alone.
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Since the Palestinian Authority does not have its own ports, Israel collects the various import taxes and levies on its behalf when they arrive in Israeli ports. The goods then get transferred via trucks to the Palestinian Authority and the taxes are also transferred by Israel. However, the amount of taxes Israel collects and then hands over is determined by the manifests declared by the Palestinian importer.
Israel Hayom can report that in most cases, the crates that contain Palestinian imports are emptied in Israeli ports and much of the content does not reach its final destination but is rather sold in Israel itself, but none of the taxes stay in Israel.
As a result, Israel loses twice: First because it transfers the tax for the entire crate to the Palestinians, and second, because it never collects the import taxes it could have received for the goods that stay in Israel.
This "Crate Sting" has already been exposed in 2020 in a State Comptroller report. In 2016, the report noted, 35% of the imported goods were never transferred to the Palestinian Authority despite being earmarked as such in the manifest. In 2017, the figure rose to 37%, and in 2018 to 41%.
Rather than reaching the Palestinian importers they were sold in Israel illegally, having never been officially imported to the state and never taxed.
According to a report issued by Israel Tax Authority, in 2016, Israel lost 450 million shekels ($123 million) as a result of this sting. The comptroller further noted that law enforcement agencies have not sufficiently cracked down on this.
The Israel Tax Authority assesses that some 50% of the content that does not get officially transferred to the PA does eventually reach Palestinian cities through unofficial border crossings, meaning Israel's losses might be half of what has been stated. However, the authority did not show documents to support that.
The Lavi organization, which seeks to promote proper governance, filed a freedom of information request. Israel Hayom can report that as a result of this request, figures have been released and they show that the situation has gotten worse in recent years. In 2019, 66% of the PA-destined goods never made it there, with Israel losing 543 million shekels ($148 million). In 2020, this rose to 70% (695 million shekels or $190 million), and in 2021 it rose to 83% (1.5 billion shekels or $411 million). Even if the Israel Tax Authority assesses that the actual sums are lower because half of the goods do eventually make it there, the loss would still be huge: 750 million shekels in 2021 ($205 million) alone.
Lavi's efforts to get answers from the government go back at least a year when it approached then-Finance Minister Avigdor Lieberman, the attorney general, the Israel Tax Authority, and the head of the Lahav 433 unit in the police. In February 2023, another query was made with the new finance minister, Bezalel Smotrich.
"The Israel Tax Authority told the organization that it did not punish importers who engaged in that scheme despite the recommendations of the state comptroller. Likewise, a special electronic monitoring system bought by the agency has not been phased into service. A law-enforcement source told Israel Hayom that Israel's ability to enforce is limited because of the Paris economic agreement with the PA from 1994. Under that agreement, Israel must transfer the taxes it collects on its behalf based on the manifest declared by the importer rather than based on the actual delivery of the goods.
The Kohelet Policy Forum petitioned the High Court of Justice in order to force the state to change its enforcement and tax collection practices. The request also includes a demand that the state take back in taxes the billions of shekels it handed over to the PA in recent years for goods that were never delivered to importers. "The money transfers are illegal and deplete the public coffers," they wrote.
The Israel Tax Authority said in a statement: "The Israel Tax Authority has been active on this issue of transferring import taxes to the Palestinian Authority as stipulated under the Paris Agreement. We carry out routine oversight over the crossings between Israel and the Palestinian Authority, including as a means of cracking down on criminal activity where goods declared for the Palestinian Authority are in fact for Israeli importers. The authority has been using the means at its disposal under the law, including through the seizure of monetary deposits of importers in cases where the goods don't arrive in the PA-held areas."
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