Palestine Country Profile: The Road Ahead for Palestine: Fiscal Policy and Performance

Abstract

Various bodies participated in offering public services besides the Palestinian National Authority government, such as the UNRWA agency, the NGOs which have a significant role in offering social, health and educational free or subsidized services, and finally, international aids and UN firms render funds for the purpose of enhancing infrastructure of the PNA. To find ways and means of financing the needed public services, the PNA has its own internal and external sources of funds. The revenues of PNA come from various resources including local revenues as well as international aids, the first contributed item of PNA budget was the VAT tax, followed by customs, then the international aids recorded as the third important source of PNA budget. To examine the performance of the PNA fiscal policy, various features that include positive as well as negative aspects may be found. The number of recruited employees to the public sector increased more than three times since the PNA emerged and reached about 133, 000 employees, besides the emergency programs attached to the PNA budget which absorbs an average of about 13,000 employees yearly, in the job creation projects implemented in the last few years. Moreover, there are about thirty thousands jobs included in the UNRWA, local governments and the NGOs, which raises the number of total of public services employees to about 176,0000 employees, which form about 31% of the total workers in Palestine 2005. Finally, it may be stated that there is a need to reform the fiscal policy of the PNA. This includes reorganizing and legalizing of indirect taxes, unifying local taxes imposed in local councils, implementing the new law of retirement issued in 2005, and to unifying budget financial transactions in one currency.

Keywords: fiscal policy, taxation, budget, Palestine

JEL Classification: H1, H2, H3, H4, H6, H30