MIFTAH
Tuesday, 27 September. 2022
 
Your Key to Palestine
The Palestinian Initiatives for The Promotoion of Global Dialogue and Democracy
 
 
 

Ramallah – 12/2/2022 – A hearing session was held at the Ministry of Finance to discuss the Value-Added Tax (VAT) draft law, based on a MIFTAH research paper, which sheds light on the gaps in the law and their impact on civil society organizations and marginalized sectors, especially those whose interests are represented by these institutions. The objective of the hearing was to develop stipulations for a just VAT law, responsive to the needs of various social sectors.

The Ministry of Finance explained that it had made a number of amendments since the first edition of the draft law, in meetings with representatives of the private sector, unions, chambers of commerce and CSOs. It said the law rested on the premise that it is not limited to collection regulation but “on our insistence to develop a contemporary Palestinian VAT law and its amendments, in place of Law No. 16 of 1963. The amendments to this law were based on military orders issued by the Israeli civil administration, according to Laoay Hanash, Director General of Customs, Excise and VAT department at the Ministry of Finance.

The CSO representatives discussed the lenient texts regarding the powers included in the draft law pertaining to the VAT imposed on the activities of non-profit organizations. The law grants broad powers to the directors of VAT departments, which the representatives maintain are not in line with the principles of good governance. In its response, the Ministry said it had made the necessary amendments to specify these powers, which now fall under the jurisdiction of higher (mandated) parties instead of leaving them to administrative discretions.

The participants stressed that the law must coincide with the concept of social justice and alleviate the financial burdens shouldered by limited and medium-income families given that the VAT is usually paid by the final consumer of the commodity. This, they maintained, makes it imperative to have zero or reduced taxation on commodities and essential services and for these to be distinguished from leisure or luxury goods to which the above tax rates are usually applied.

At the end of the session, the parties agreed to continue discussions and to carry out the following: a redrafting of Article 4 of the bill by CSO legal experts in cooperation with the Finance Ministry’s legal advisor, to ensure it coincides with Law 1 of 2000, which regulates the work of CSOs. Furthermore, the Ministry of Finance confirmed it would work within the Cabinet and with the relevant ministers to prepare a detailed list of VAT-exempted or reduced taxed commodities and services in order to ensure this tax is fairly imposed on services and distinguished from leisure and luxury goods.

The session is part of MIFTAH’s follow-up of public fiscal policies, including initiating dialogue on public spending and tax policies in a bid to narrow the gaps and guarantee they are responsive to marginalized social sectors, thereby fostering participation in the development of policies and the institutionalization of good governance values in the formulation of public policies.

 
 
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