You Must Pay the Rent! Written by Diana Atallah  The Media Line Published Thursday, December 20, 2012

Israeli Tax Freeze Cripples Palestinian economy RAMALLAH - Mohammed Saadi hasn’t gone to his job at the Palestinian Authority's Public Works and Housing Ministry for a week now, “I pay seven dollars for transportation each day, which means more than $125 from my $450 monthly salary is being spent on that," he told The Media Line. Saadi, 30, is one of the Palestinian public employees who haven’t been paid their November salary yet due to a deep financial crisis facing the government. Public Employee Union chief Bassam Zakarneh told the Media Line that salaries are already almost three weeks overdue. Saadi, a janitor and mail boy, doesn’t know whether the government will deduct the week he stayed home from his salary. “I’m afraid if my 18-month baby gets sick I won’t find the money to buy him medicine,” he said despondently. “Although public employees and their families enjoy health insurance, not all medicine is found in the hospitals as a result of the crisis and austerity measures. “Sometimes they don’t even have the basic analgesic drugs," he told The Media Line.   Responding to a Palestinian Authority move to elevate its status to that of a non-member observer state at the United Nations General Assembly decided to withhold the estimated $100 million dollars a month of taxes and customs revenues it collects on behalf of the Palestinian Authority for the next four months and use it to pay the Israeli electricity and water companies instead.  That sum is more than a third of the Palestinian Authority's (PA) monthly revenues, “Cutting it means that the government is left with $50m. locally collected from taxes”, Nasr Abd El-Karim, an economics  professor at Birzeit University, told The Media Line.  Prime Minister Salam Fayyad this week called upon Palestinians to boycott Israeli goods, the first time such a threat has been made from such a high official, calling such a boycott a legitimate reaction to Israeli "piracy"of Palestinian money. However, a widely circulated Facebook cartoon pictured a Palestinian employee saying that "someone should tell Fayyad that Palestinians don't have any money to buy goods" of any kind. Several thousand teachers organized a strike earlier this week in the northern West Bank city of Nablus and the Public Employees Union decided to join and announce a general strike -- excluding a part of the media and health sectors. Before the UN bid, the Arab League said it would provide a $100 million safety net for Palestinians, but the money hasn’t come yet.  The Palestinian Monetary Authority said local banks have agreed to grant a short-term loan of $100 million to the PA until the promised Arab League money is received.  This amount is not expected to ease the crisis, however, as the monthly government salaries bill itself is estimated at $160 million.  Banks are less willing to lend to the government as debts of the PA increase, and amid talks of a PA collapse.  It is expected that the PA will only pay a portion of the workers' salaries, ranging between $400 and $1000 each. “This is only one quarter of what the employees deserve and will mostly be spent on repaying the loans they owe to the banks,” Zakarneh told The Media Line. The Palestinian Monetary Authority has stopped penalizing public sector employees who had no money to pay their bills. As the largest work force in the Palestinian territories, the public sector salaries are vital to the vulnerable Palestinian economy.  An accountant in a local information technology company told The Media Line most of his clients are public employees. “We called the customers and agreed on a way to reschedule their bills,” Faris Ali told The Media Line.  So far this year, the PA has accrued more than $1.2 billion in debt, a yearly deficit that international donations used to cover. However, the Arab and foreign donors reduced their aid in the past few years because of what analysts say is the lack of a clear political solution to the Palestinian-Israeli conflict.  However, economics professor Abd El Karim blames the Palestinian government for a lack of economic planning. He said the PA routinely gave cars to senior officials and paid many of their personal expenses including phone bills, gas bills and travel expenses. However government spokesman Nour Odeh told The Media Line that the government formulated its budget based on the promised pledges as well as an estimated account of the tax money expected from Israel. “Israel can’t just withhold the money because it feels like it, or some officials have an elections campaign to run,” added Odeh, referring to Israel’s elections next month. Abd El Karim said that the Israeli “occupation” is responsible for decreasing potential investments in the Palestinian territories, but the Palestinian split between Hamas and the PA has also contributed to the crisis.  The PA pays some of the Gaza Strip’s water, electricity, and gas bills as well as the salaries of thousands of PA employees who haven't worked in their ministries since Hamas took over the Gaza Strip in 2007. “On the other hand, the government in Gaza refuses to give us the tax invoice so we can collect them from Israel” said Odeh.   Earlier this year, Palestinians and investors revolted against a government decision to raise income taxes, pressuring the government to postpone it.  Last September, the public transportation union succeeded in bringing West Bank life to a standstill after it organized a strike protesting the government’s decision to raise gas prices. Demonstrators protested the high cost of living and demanded Fayyad's resignation. However, the current crisis will not be resolved by his resignation and an increase in external aid that would only provide a short-term solution.  “The only way out of this problem is the Arab money," said Abd El Karim.  "The Qatari emir may decide to generously donate money to the Palestinians the way he did when he visited the Gaza Strip,” he added, referring to the Qatari prince's expected visit to the West Bank at the end of this month. After an immediate solution is found, Abd El Karim wants to see a change in the government's economic policy it has followed since 2007. "Analysts have been warning against this policy. I respect the intentions behind it but we have to learn from the failure of the past five years,” he told The Media Line. In the long run, it is unlikely that the Palestinian government will be able to depend on external aid, bank loans and raising taxes.  In a meeting with journalists last week, senior Fatah official Mohammed Shtayyeh said that Palestinians will engage in a comprehensive economic dialogue so all sectors can share the financial burden.