Palestinian farmers pressure for fair agricultural taxes

Palestinian farmers often find themselves stuck between the Israeli land evictions and Palestinian agricultural policies. One of their biggest challenges for farmers is the VAT (value-added tax), which increases their costs of production.

For many years, farmers advocated for more favorable tax policies, supported by FAIR for ALL partner Palestinian Farmers Union (PFU). As a result, in 2016, a new tax law exempted farmers from income tax, and agricultural companies from the first NIS 300,000 (approximately €87,000). Unfortunately, this did not include livestock breeders. Moreover, the government decided to deduct 30% of farmers’ tax refund.

Continued pressure by PFU in the past year has resulted in a cancelation of the 30% deduction on tax refund for plant producers, by the Ministries of Finance and of Agriculture. Furthermore, they activated the tax refund policy for all farmers: both arable farmers and livestock breeders, from which some 1,000 to 1,400 livestock breeders will benefit with an income increase of 16%. PFU now conducts an in-depth study to support the implementation of these two agreements.

Reduced tax evasion, lower food prices

PFU has calculated how not only farmers, but also consumers and the Palestinian government will profit from the tax exemption. Since farmers and agricultural companies are obligated to register before they can enjoy the tax exemption, tax evasion will diminish. Currently, the amount of money lost by the Palestinian Authorities because of tax evasion, is approximately NIS 128 million per year. PFU expects that to be reduced by NIS 50 to 60 million.

The tax refund will decrease the costs of food production by farmers, which is an incentive to invest in the sector, and encourage more people to enter the market. As a result, unemployment will be reduced, household incomes will increase, and food – specifically meat - prices will go down. Sheep breeder Abu Saker from Alhadedia is relieved by the new tax agreements: “During the last year we suffered from a sharp increase in food prices, especially after COVID-19. The tax refund law will help me to recover part of my losses, and, as food prices will go down, I can invest and scale up my business.”