Monday, May 15, 2006

Where'd the Money Go?

David Frankfurter posted a great piece of reasoning and research on the finances of the Pals.:-

The Funding for Peace Coalition just posted a summary of the Palestinian Authority accounts for the three calendar years 2003 - 2005. Except for the most, well, accounting types among us, that sounds pretty boring. In fact, the introductory notes make some interesting reading. And then it degenerates pretty quickly into eye-glazing tables of numbers.

But, being a boring CPA by trade, I forced myself into a little look. And being a masochist, whether it's accounts or a pay slip, the first thing I review is income taxes. After all, practically everything there is to know about tax in the Palestinian Authority - who pays and how much - is unknown. So I tried to figure it out from the published accounts; and here's what I turned up.

From what I could see, Al Capone probably looks down on his protégées in the Palestinian kleptocracy with pride - and a little jealousy. Chicago simply didn't provide the same opportunities as down-town Ramallah.

Overall, the PA tax regime is relatively favourable, although income taxes cut in at the first shekel. The minimum personal tax rate is 5%. The corporate tax rate is the same as the highest personal tax rate - 20%. For salary earners, tax is deducted at source. Total reported income tax collections for the full three years was a mere $173 million. That includes amounts collected by Israel on behalf of the PA. This means that (at a 5% - 20% marginal rate) total taxable income for three years for the whole PA was between $865 million and $3,465 million.

Don't fall asleep quite yet - lets see how that adds up first! Let's assume that the PA knows how to deduct taxes from its own employees, and that UNWRA, being a law abiding organisation, deducts taxes too. PA salaries were reported at $2,552 million for the three years and UNWRA salaries in the West bank and Gaza run at about $600 million for three years - that means that not a single other person or company in the whole Palestinian Authority earned a single shekel of taxable income. Not bad considering some of the fancy cars, houses, cell phones, shopping malls and other attractions one hears are used by the upper classes of Ramallah and Gaza.

In common with kleptocrats throughout history, the Palestinian elite have clearly preferred that their awesome wealth - the fortune generated by skimming international donor generosity - remain tax-free. But in the world of organised crime, it's known that, when freshly laundered assets are re-invested, some token tax is paid. But from these accounts, it's clear the Palestinian elite lack the elementary courtesy to pay modest taxes on 'legitimate' income earned from their ill-gotten gains.

When I met the head of the Middle East Office of the EU, a Brit who works out of Belgium, I told him that I couldn't understand why they allowed the PA to steal the EU blind, not to speak of embezzlement as a naughty vice.

And then I offered him my understanding: anything is kosher as long as it gets the Jews out of the "territories".

No comments: