## **Customs duties**

**Imports customs regulations and procedures in the Palestinian Territories and Israel are determined within the framework of Israeli customs laws, international customs agreements, and the Paris Protocol signed by the GoI and the Palestinian Liberation Organization (PLO) in 1994.** Valuation of commodities for customs purposes is based upon the 1994 General Agreement on Tariffs and Trade (GATT). The Palestinian customs system is laid out in Customs Law No. 1 of 1962, which specifies its functions, procedures, and transparency and integrity standards.

## **Value-Added Tax (VAT)**

**VAT is levied on the sale of goods, the provision of services, and imports.** The PA does not currently collect any domestic VAT in Gaza. Domestic VAT is only collected in the West Bank. Import VAT—one of the taxes making up clearance revenues that Israel collects on behalf of the PA—is transferred to the PA’s MoF in the West Bank. In 2017 (the year of analysis), the statutory VAT rate was 16 percent. Under the Paris Protocol, The PA VAT rate should be within the range of maximum (minimum) 2 percentage points above (below) the Israeli VAT rate. Regarding preferential VAT, only crop production and commercial transactions carried out by charitable societies and donor organizations are subject to “zero rates”. In 2017 the main VAT exemptions were applied to tourism services (purchases by foreigners), fresh fruit and vegetables, and exports.

## **Excises**

**In the Palestinian territories, excise taxes are applied domestically to a selection of products** . This includes alcoholic beverages, petroleum, vehicles, and tobacco (regular and flavored hookah tobacco).<sup>23</sup> West Bank residents must pay excises to the PA (according to PA rates) for alcoholic beverages and tobacco purchased in the West Bank and for fuel bought by the PA from Israel; also, PA tax rates are applied for imported goods from third countries. East Jerusalem residents pay to the GoI according to the Israeli tax rates for goods imported from third countries or purchased in East Jerusalem; they pay to the PA directly on alcohol and tobacco purchased in the West Bank. In 2017 the Israeli excise rates for the fuel products were 2.89 NIS/L for gasoline, NIS 3.02 NIS/L for diesel and 2.89 NIS/L for kerosene; it is expected that PA excise rates are similar to avoid arbitrage across countries.

# **2.4 Transfers**

## **2.4.1 Direct transfers Social Protection**

**The PA’s Ministry of Social Development (MoSD) is responsible for provision of basic social protection to the most vulnerable families in the West Bank and Gaza through various cash and near cash programs.** There are four main components of social protection programs in the West Bank and Gaza: social assistance, social insurance, social services, and social justice.

**The primary government-funded social protection program is the national Cash Transfer Program (CTP).** In the year 2017, the CTP represented 63 percent of the total MoSD budget.<sup>24</sup> The CTP aims to reach households below the extreme poverty line and marginalized households between the national and

> 23 Import Laws and Procedures, 2022, Investment Promotion and Industrial Estates Agency, <u>Import Laws and Procedures (pipa.ps).</u>

> 24 Annual Statistical Report (2017), Ministry of Social Development.

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