DIRECT TAXES

The Civil Administration's tax system is based largely on Israeli personnel -- 108 Israelis, in addition to 52 Palestinians who work mostly in the area of property tax -- and the Palestinians are therefore not completely familiar with the system. Israel will continue to `tutor' the Palestinians for an additional period of six months following the Palestinian assumption of responsibility on December 1st.

Israel is funding a training program which it has begun for Palestinian employees in this field. Graduates of these courses will receive practical training in the existing tax offices of the Civil Administration. In order to run the tax system, the Palestinians will receive over 50,000 files, and in time will set up their own computer system.

Revenue from direct taxes in Judea and Samaria amounts to more than NIS 140 million annually, and the Palestinians will have to maintain a high level of tax collection in order to be able to finance the operation of the five fields transferred under the early empowerment agreements.

VAT

Even though early empowerment, as agreed upon in the DOP, did not include VAT, this area was included during the Cairo negotiations. The VAT office is also largely dependent upon Israeli personnel ( 89 Israelis and 15 Palestinians ), and the Palestinians will receive tutoring and training, as in the field of direct taxes. The Palestinians will receive consulting and computer services from the six existing Israeli VAT offices, until they are able to set up their own independent system.

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