Palestinian Workers Exploited by Israeli Tax Authority

<p>Tax regulations for Palestinian workers in the Israeli Settlements is based on Jordanian law and as a result workers are paying higher taxes than the colleagues in Israel or in PA area.  When it comes to settlements, Israel is ignoring international law - but where workers' rights are concerned, international law requires compliance.</p>

Tax regulations for Palestinian workers in the Israeli Settlements is based on Jordanian law and as a result workers are paying higher taxes than the colleagues in Israel or in PA area.  When it comes to settlements, Israel is ignoring international law – but where workers’ rights are concerned, international law requires compliance.

For years, Khaled, a Palestinian employed in Mishor Adumim (an Israeli industrial park in the  occupied West Bank) worked for a salary that was below the minimum wage and without social benefits. After demanding his rights, he entered into an agreement with his employer, according to which he would receive compensation of 60,000 shekels (NIS) for the past 7 years and his salary would be adjusted. However, when his check arrived, his mood darkened – he had received only NIS 50,000. The Israeli Tax Authority refused to refer to the agreement as a past debt and defined NIS 60,000 as income for 2017 and thus deducted NIS 10,000.

An Israeli worker who would have signed an identical agreement that Khaled signed would have received the full amount. The tax authority would have spread the sum over the previous seven years. As an Israeli employee who earns below minimum wage he would be entitled to full tax exemption. However, income tax laws in Israel are not applicable to Palestinians working in Israeli settlements. This creates a 20% tax gap between Palestinian and Israeli workers.

Like Khaled, 30,000 Palestinians work in settlements outside of Israel’s sovereign territory. They are subject to a separate tax system which is discriminatory. A Palestinian worker who earns NIS 5,000 monthly (gross payment) pays more than NIS 300 in income tax. His Israeli counterpart, working in the same place, receives a tax credit of up to NIS 5,280 and might be eligible for a negative income-tax refund. The result is that the salary of a Palestinian worker is about NIS 500 less than that of his Israeli counterpart.

In 2007, nine High Court justices unanimously ruled that there can be no discrimination between Palestinian and Israeli workers employed by Israeli employers in the Settlements. But even today, a decade after the ruling, many Palestinians employed in settlements work below the minimum wage, and without social benefits. In general, large companies have complied with the High Court’s instructions, and workers employed there have received a significant increase in their wages, as well as equality in their working conditions. However, Palestinian workers who were lucky enough to receive these supplements still suffer discrimination, because their net wages are lower than those of their Israeli counterparts. Illegal discrimination, which was kicked out the door by the High Court of Justice in the field of workers’ rights, has returned from the window in the form of tax rates.

What do the tax authorities rely on when they discriminate against Palestinian workers? The answer is, Jordanian income-tax regulations, which were practiced in the region until June 1967. The Israeli rationale is compliance with the 4th Geneva Convention, which requires that “occupation forces must maintain laws that existed in the occupied territory.” The Israel rationale is strange, because when it comes to settlements (whose very existence contradicts the Geneva Convention), Israel chooses to ignore international law. But when it comes to workers’ rights, suddenly international law is binding.

In the economic agreement that came after the Oslo Accords (Paris Protocol of 1994), the two sides agreed that the Israeli Tax Authority would deduct income tax from Palestinians working in settlements and transfer it to the Palestinian Authority. However, the tax rates were adjusted according to Jordanian law. The absurdity here is that an agreement between two political entities – Israel and the PLO – is subject to the law of a third party, which is Jordan.

Tax benefits are an important tool to encourage low-wage workers to enter the workplace. An active tax policy initiated by Israel in the last decade had contributed to an increase in worker participation in Israel significanly. The Net Family Reform (initiated by Finance Minister Kachlon recently), is expected to increase the income of an average Israeli family by thousands of shekels per year. However, these benefits are beyond the reach of Palestinian workers, who are also not eligible for benefits for disabled children.

The solution to this legal absurdity is simple: either make tax credits or tax rates for Palestinian workers in the settlements equal to those of their Israeli counterparts – according to the principle set by the High Court of Justice – or let Israel respect the tax laws of the Palestinian Authority. Either case will result in a significant increase in the net wages of Palestinian workers. Israel must implement equality of working conditions regardless of nationality, religion or language, including in the field of taxation – and stop its discrimination against Palestinian workers.

Translated from the Hebrew by Robert Goldman


אודות Assaf Adiv