2018 Activities

Focusing on Partnership with Civil Society, Disengagement from the Israeli Side, Ending the Split and the Poor Families...The Civil Society Team for Enhancing Public Budget Transparency (CSTPBT) announces its Position on the Draft Public Budget of 2018 ca

Focusing on Partnership with Civil Society, Disengagement from the Israeli Side, Ending the Split and the Poor Families...The Civil Society Team for Enhancing Public Budget Transparency (CSTPBT) announces its Position on the Draft Public Budget of 2018 ca

The Civil Society Team for Enhancing Public Budget Transparency (CSTPBT ) held an urgent press conference at which presented its position on the draft public budget of 2018, with focus on the extent to which this draft expresses a genuine approach by the government to end the split and disengage from the Israeli side and whether the draft reflects a participatory approach in working with the civil society organizations as well as an explicit plan to reduce expenditures, support the poor families and enable them economically.

The Executive Director (CoE) of AMAN Coalition for Integrity and Accountability (CSTPBT  Secretariat) Majdi Abu Zaid noted that this conference comes after the Ministry of Finance and Planning (MoFP) has briefed the ministers, representatives of some parliamentary blocs, some businessmen and representatives of donor countries on the 2018 draft public budget without engaging the civil society organizations or the Civil Society Team for Enhancing the Public Budget Transparency despite the commitments made by the government in the National Policy Agenda of 2017-2022 to promote transparency, be more open to citizens and to enable the citizens to access to information.

Abu Zaid has stressed that the Ministry of “Finance and Planning” did not abide neither by transparency principles of developing the public budget nor the legal provisions stipulated in the Palestinian Basic Law and Public Budget Law, which resulted in the lack of timely approval of the budget which caused damage to the plans of public ministries and institutions.

The CSTPBT members expressed their position towards the draft Budget which included 3 scenarios “plans” for the Public Budget of 2018, namely, Baseline budget – it includes the existing situation in the southern governorates; Additional budget - Southern governorates and Consolidated budget – it includes the (baseline budget + additional budget). The Team also called the government to adopt the scenario that includes a consolidated budget, which reflects the serious willing to end the split, in addition to a set of remarks the most important of which are:

• The additional budget scenario (plan for the southern governorates and the consolidated budget scenario (plan) have included the (integration of 20,000 employees from the Gaza Strip); and the important question: How was this figure identified? And on what basis? What are the criteria adopted? Though the Legal-Administrative Committee for the Gaza employees has not issued its recommendations yet. What are the procedures that were set to end the work of the rest of approximately 25 thousand employees? The identification of this figure reflects the government's stated policy that its main task is to provide salaries and not anything else.
• The baseline budget scenario (plan) has included a funding gap of (NIS 1,737) million. The additional budget scenario (plan) for the southern governorates has also included a deficit of (NIS 1,954) million. The consolidated budget scenario (plan) has included a funding gap of (NIS 3,692) million, after the external funding in its two aspects of (budget support and developmental funding), which constitutes the largest funding gap in the history of public budgets. All this is occurring in the light of the chronic and cumulative deficit in the public budget and weakness in the Palestinian economy. The draft public budget of 2018 has included a number of governmental proposals to deal with the funding gap, including amending the tax system, requesting the financial rights from the Israeli side and continuing austerity in expenditures. Therefore, the CSTPBT  warns from increasing the tax burden and raising the fees of basic services provided to Palestinian citizens such steps would harm stability and steadfastness.  The Team, however, encourages the adoption of a fair, progressive and strict tax policy against tax evasion. The Team also encourages adopting a policy to exert pressure on the Israeli side to prevent financial leakage, with which the Israeli side does not deal transparently. The Team calls again for reconsidering the Palestinian Authority’s expenses through adopting a comprehensive plan which fits the nature of the post Central Council decisions that adopted a popular resistance policy and its requirements. It is noteworthy that the continued increase in expenditures does not reflect the government's claims of austerity.
• Although the CSTPBT  supports the government's efforts and trends to bridge the funding gap, it is seriously concerned for having a gap of such size, which threatens the financial statement of the Palestinian National Authority and evidently impacts the government plans and programs.
• The data available on the public budget of 2018 did not indicate any trends to increase the support of poor families, especially in light of the data of the Central Bureau of Statistics on the high rate of poverty and unemployment. The major principles of the public budget also did not include details on supporting the poor families. We, the CSTPBT , are concerned that the government may increase the empowerment program allocations for the Ministry of Social Development at the expense of cash assistance program for poor families, and we believe that the allocations of the two programs should be increased in parallel, without prejudice to the rights of the poor, especially in the Gaza Strip.
• The draft budget indicated the government's intention to reduce the external medical treatment bill, which is in line with the Team’s recommendations, but this reduction should not be reflected on the allocations of the Ministry of Health. However, the Team asks for increasing the allocations of the Ministry of Health, especially the developmental budget.
• The draft public budget did not indicate that there are plans to re-organize the reality of security institutions in an attempt to control their expenses, which constituted about 26% of the 207 budget, especially the operational expenses "goods and services", the actual expenditure of which during 2017 has amounted (NIS 314,479,000).

Revenues and Expenditures: a Need to Develop a Plan to Expand the Tax Base, Restrict the Net Lending and Clear the Payroll Bill

The draft consolidated budget included expectations that the value of net public revenues will reach (NIS14, 405) million, with an increase by14.2% compared to what was achieved in 2017. The draft has provided scenarios that are expected to achieve this figure. These scenarios include the amendment of income tax for individuals and companies, which requires a clear plan to expand the tax base and address the tax evasion phenomenon, including reviewing the policies used to collect tax arrears, and the policies used to hold tax evaders accountable. The CSTPBT  encourages the unjustified tax-exemption policy which is resulting from abusing the provisions of Encouragement of Investment Law which facilitated the tax evasion phenomenon.
The total running cost and net lending in the consolidated draft budget was estimated at (NIS 17,933) million, with an increase by 14.2% of the expenditures achieved in 2017 and an increase by about 2 billion shekels. This increase includes the increase in the wages and salaries by one billion Shekels and an increase in other expenditures by one billion Shekels as well. The CSTPBT  believes that it is necessary to clarify the criteria of selecting the employees to be added and clarify the mechanisms of dealing with the other employees. The Team also emphasizes the need to filter and clean up the payroll bill and reconsider the allowances and privileges.
In addition, the net lending in the draft budget of 2018 was estimated at (NIS 900) million, which is slightly less than the estimated amount in 2017. It shall be noted that this lending weakens the public budget and it should not be included in it and there is a need to further restrain and reduce this lending. Developmental expenditures in the baseline budget (Northern Governorates) were estimated at (1,873), with an increase by 500 million Shekels than the amount expended in 2017; however, it was estimated in the consolidated budget, which includes the developmental budgets in the Gaza Strip by (NIS 2,953) million. However, the CSTPBT  raises the question how these costs will be financed, and whether it will be dependent on the developmental funding which mostly depends on the donor countries or it will be dependent on the state treasury. The Team also stresses the need to know the priorities governing the developmental spending, and what are the priorities of spending and developmental programs allocated to the Gaza Strip to improve and develop it.

Public Debt and Arrears: an Urgent Need to Publish the Details of the Public Debts, the Value of Arrears Reflects a Renewed Crisis between the Government and the Private Sector

The 2018 draft public budget did not include any details on the public debts, private sector arrears and mechanisms of repayment. Data of the Ministry of Finance and Planning indicate that the public debt by the end of 2017 has reached (8, 849) million Shekels as it was reduced by (700) million at the beginning of the year. However, the commitment to the principles of transparency requires the publication of all the details and tables related to the public debt, both internal and external, creditors, the size of loan installments, interest, payment mechanisms, etc.
The (net cumulative) expenditure arrears for 2017 have amounted to (NIS 2,714.6) million, which reflects a renewed financial crisis between the private sector and the Ministry of Finance. The non-payment of dues to many suppliers will result in a decline in the economic performance and a reduction in employment opportunities. The draft budget does not indicate how to deal with these arrears, are they going to be repaid or transferred to a special item, although the value of the arrears does not necessarily reflected the actual figure, which is expected to be higher due to the lack of agreement on the definition of calculating the number of arrears and the multiplicity of procedures in the internal auditing processes and internal accounting of arrears invoices.

Public Pension Fund: Debts by 6 Billion Shekels before the Beginning of 2018

A sum of NIS 260 million was transferred to the Pension Fund in 2017, divided into about NIS 20 million per month (in one of the months, NIS 40 million was transferred). However, the required amount, according to Ministry of Finance data, was (NIS 735) million for the year 2017, and thus an amount of (NIS 475) million will be added to the debts of the Pension Fund to be about (NIS 6) billion before recording the 2018 debts. The government is talking about increasing the amount it will transfer monthly to NIS 25 million, or 300 million shekels per year, which is an insufficient approach to meet the Ministry of Finance's commitments to the Fund. The CSTPBT  believes that the government should develop a governmental plan through policy intervention to address the accumulative debts of the public treasury in favor of the pension fund in order to ensure the sustainability of the Pension Authority functioning, the continuation of the pension funds and their ability to pay future pensions to the participants.  Such a policy should include the regularity of full payment of contributions and subscription fees of employees’ retirement that amounting to approximately 116 million shekels per month, and not to pay only 20 million shekels. The government should also develop a plan to re-schedule the debts accumulated on the public treasury to be paid over a number of years through the payment of arrears or debts, taking into account the interests of the value of debt in accordance with the provisions of law. The failure to announce reaching an agreement between the Ministry of Finance and the Pension Authority as previously announced by the Chairman of the Pension Authority Dr. Ahmad Majdalani confirms and enhances the CSTPBT  concerns of the lack of seriousness to address the Pension Authority debts.

Amendments to Tax System: Substantial Need for Community Consensus on a Long-Term Policy for Income Tax

The draft public budget of 2018, included a set of amendments to the Income Tax Law, including the adoption of a fourth tax bracket (20%), and raising the amount of tax exemption, so as the amendments will include individuals and companies, expand the taxpayers' base, reduce tax evasion, encourage SMEs and MMEs through tax cuts, and other amendments. The CSTPBT  supports the proposals that promote social justice and it believes that the government still does not have a clear fiscal policy on taxes, which has prompted it to make repeated amendments to the law within a short period. The Team, therefore, believes that community consensus should be built on a clear long-term policy for income tax.

Funding Gap, Austerity Plan and Reduction of Expenditures: Very Optimistic Scenarios

The baseline budget (northern governorates) of 2018 has included a funding gap of (NIS 1,737) million, while the consolidated budget (which includes the Gaza Strip) has included a funding gap of (NIS 3,692) million, i.e. (NIS 307) million per month. The government talked about bridging that gap through several procedures (10 axes) as it expects to collect the total of 600 million dollars through these procedures (amendment of income tax brackets, temporary suspension of Encouragement of Investment Law, applying income tax on profit distributions, 20% reduction of net lending, 10% of medical transfers, strict austerity including adjustment or suspension of some allowances, loss files, fees, Owners and Tenants Law and relationship with donors), which left ($426) million as a funding gap i.e. (NIS 1,532.9) million, or NIS 127 million per month. Despite taking such measures, the budget had a gap of (NIS 1,532.9) million. The CSTPBT  keeps its reservations on the amounts expected to be collected, as they are very optimistic.

The draft budget included 10 axes to be worked out with the expected impact to reduce the gap, including the intensification of requesting the financial rights from the Israeli side, through the recovery of collection fees (3%), border fees, health insurance for workers and the commercial relationship with the Israeli side. The amount expected to be collected through these procedures has reached ($120) million (equals about NIS 420) million. The CSTPBT  believes that this scenario is very optimistic, especially in the light of the Central Council decisions, and the demand to disengage from the relationship of economic dependence enshrined in the Paris Economic Agreement, which requires a clear strategy and national plan for disengagement and self-reliance.

Calls to Re-consider the Budget to Take into Account the Disengagement Decisions and Paris Protocol

Finally, the Civil Society Team for Enhancing Public Budget Transparency (CSTPBT ) calls upon the government and the Ministry of “Finance and Planning” to adopt the participatory approach with civil society organizations in general and with the CSTPBT  in particular. The CSTPBT , stresses that its role is not a substitute for the role of the Palestinian Legislative Council in terms of approving and overseeing the public budget. Since the Team believes that the way in which the parliamentary blocs were used for media purposes is not a nice method by the government or the Council to give legitimacy to the adoption of the public budget, it emphasizes the importance of the role of civil society organizations in the partnership to develop and identify national priorities, manage the public funds and oversee the extent to which abided by in line with the national policy agenda.

The National Team calls for reconsidering the budget to take into account the scenarios included in the decisions of economic disengagement, and to reconsider the Paris Protocol. The Team is requesting the adoption of immediate serious procedures starting by an urgent meeting of the National Economic Development Task Force set up by His Excellency the President in Decision No. (167) of 2016 with the membership of the (Minister of Finance and Planning, Minister of Economy, Minister of Agriculture, Minister of Local Government, The Palestinian Economic Council for Development and Reconstruction PECDAR, Governor of the Monetary Authority, Chairman of Businessmen Association, Chairman of the Federation of the Chambers of Commerce, Chairman of the General Federation of Palestinian Industries, Chairman of PalTrade Board of Directors) to study the disengagement scenario and to identify the gaps in the relevant policies as well as the consequent changes in revenues and expenditures and re-examining the Palestinian-Israeli banking relations.

The CSTPBT  also calls on donors and international relief agencies to increase their allocations to support the Palestinian people, especially the organizations that provide public services to the citizens.

Please click here to see the full CSTEPBT position