Middle East

Gazans squeezed by triple taxes as Hamas replaces lost income

Gaza security personnel inspect goods which have been brought across from Israel Image copyright AFP
Image caption Hamas, which runs the Gaza Strip, has increased taxes on imports over the past two years

Standing in his big, but nearly empty, warehouse, Hamam al-Yazjji, is struggling to keep his business alive.

It is not just the daily hardships of making a living in besieged Gaza that are hitting him hard, but the high taxes imposed by Islamist group Hamas, which controls the tiny coastal strip.

Hamas has recently further raised taxes after a drop in financial support from allies, such as Iran and the Muslim Brotherhood, and the collapse of its tunnel trade with people in Egypt.

"I used to import tens of food items from around the world, but in the last two years Hamas makes it almost impossible to make a profit because of the high taxes they imposed," says Mr Yazjji, who is based north of Gaza City.

Image caption Hamam al-Yazjji has found it increasingly difficult to make a living because of the multiple taxes

Consumers and businesses in Gaza are hit three times by tax.

Israel collect taxes on imports into Gaza and the West Bank on behalf of the Palestinian Authority (PA) and transfers the money to the PA after deducting a small administrative fee.

"We pay three different types of tax on any imported products - to Israel, to the Palestinian Authority and to Hamas," Mr Yazjji says.

According to Hamas finance ministry official Youssif al-Kayali, the group collects $15m (£11m) a month in taxation.

Price hikes

Hamas and the PA agreed to form a unity government in 2014 to end years of tension, but it has never been properly implemented and the Islamist movement is still the de facto power in Gaza.

It has also faced a crippling blockade by Israel and Egypt and financial sanctions from other countries since it won Palestinian elections in 2006.

When Hamas raised taxes about three months ago, it pushed up the price of about 400 imported products by 20%.

Buying a car in Gaza

42%

of the purchase price is tax

  • Skoda Octavia is the most popular car in Gaza

  • $12,335 Cost of second-hand 2013-14 Octavia in Europe

  • $7,220 Taxes and duties applied by Israel and Palestinian Authority

  • $1,805 Import duty applied by Hamas-run authorities in Gaza

Among the products most affected are cigarettes, which have gone up by 35% since March, and cars, which are 25% more expensive.

Hamas also imposed a $1,000 annual licensing fee on cafes, restaurants and hotels.

The movement says funds will be used to pay its 40,000 civil servants, who have not received regular full salaries in more than two years.

"We will collect taxes on secondary goods only - such as clothing, fruits, or electrical appliances. Flour, rice, sugar, medicines and other basic goods will not be taxed," Said Ahmad Abu Halbiya, a Hamas member of parliament, said.

The tax increase "will benefit the citizens of Gaza - especially the civil servants and security forces that need money to feed their families," he said.

Loss of support

An unknown amount of money is spent by Hamas on weapons and military infrastructure, but this too is under pressure.

Iran provided significant financial and military aid to Hamas from early 2006 - amounting to $23m a month, according to Palestinian political analyst Fathi Sabbah.

But Tehran, the main backer of Syrian President Bashar al-Assad, dramatically reduced its support in early 2012, when Hamas refused to take sides in the Syrian civil war.

The movement also lost about $10m a month, said Mr Sabbah, when Egypt's Islamist President Mohammed Morsi was overthrown in 2013.

Image copyright AFP
Image caption Egypt's destruction of the tunnels has cost Hamas heavily

Gaza's citizens have increasingly picked up the bill as Hamas seeks to replenish its depleted funds.

After Mr Morsi was ousted, Hamas lost a second key source of income when Egyptian forces destroyed tunnels it said were used by militants to smuggle weapons into Sinai.

Hamas used to make millions of dollars from taxes it imposed on goods brought through the tunnels. The recent tax increases though have come at a price.

"Hamas has lost a great deal of its popularity by imposing taxes to pay the salaries of public workers," says Mr Sabbah.

And Hamas's financial crisis is unlikely to be solved soon with Israel and Egypt continuing their border closures amid fear of attack by militants from Gaza.

So the Islamist movement is forced to manage and make do, in the hope that events in the Middle East may one day turn in its favour.