Your Taxes: What’s really in the US economic peace plan?
By LEON HARRISShekel money bills(photo credit: REUTERS)
The White House published an outline on June 22 of the economic peace plan for the Middle East, known as “Peace to Prosperity,” for debate at this week’s Bahrain workshop.The Oslo Peace Accords concluded by former president Bill Clinton contained the Paris Agreement as an annex which basically aimed to turn Israel and the Palestinian Authority into an economic customs union like the European Union. Parts were implemented.The latest US Peace to Prosperity plan is mainly about reforming the PA and ridding it of corruption in order to facilitate investment.Israel is hardly mentioned.Goals of Peace to ProsperityThe plan presents a vision at the macro level. The details may come later. The goals over 10 years are to more than double Palestinian GDP, create over one million Palestinian jobs and reduce the Palestinian poverty rate by 50%.FinanceWith the potential to facilitate more than $50 billion in new investment over 10 years, Peace to Prosperity represents an international effort for the Palestinian people.Billions of dollars of new investment would apparently flow into various sectors of the Palestinian economy; businesses would have access to capital; and the markets of the West Bank and Gaza would be connected with trading partners, including Egypt, Israel, Jordan and Lebanon.AdvertisementCapital raised through this international effort would be placed into a new fund administered by an established multilateral development bank. Accountability and conditionality safeguards would protect investments and ensure that capital is allocated efficiently and effectively.Roads and railThis section is highly significant to Israelis. The project would support the construction of roads across the West Bank and Gaza. Additional investment would finance the development of a transportation corridor directly connecting the West Bank and Gaza Strip through a major road and, potentially, a rail line.Ultimately, the White House says this project has the potential to unlock trade, grow exports, and increase foreign direct investment in the West Bank and Gaza and its neighbors – particularly Egypt, Israel and Jordan.AgricultureWith increased access to capital, farmers would have the opportunity to purchase seeds and fertilizers while developing greenhouses, irrigation systems and other infrastructure. Other funding would help to rehabilitate arable land and build a new educational center to enhance agricultural education and training.ManufacturingThe plan would support the development of state-of-the-art industrial zones and other manufacturing facilities in which Palestinian companies will benefit from tax and financing incentives that will lower the cost of doing business.Natural resourcesThe plan would provide support for the development of major resource reserves, such as the Gaza Marine natural gas field, oil fields and quarrying sites in the West Bank.TourismTo unlock the benefits of increased tourism in the West Bank and Gaza, this project will support investment in hotels, food and beverage establishments, and other tourism-related industries.Digital servicesThis project would provide financial incentives and technical expertise to support the Palestinian private sector in developing 4G LTE and 5G telecommunications services. Other financial incentives would support Palestinian companies and municipalities in providing public high-speed wireless internet services.Regional investmentJordan, and possibly Lebanon and others, could benefit from new enterprise funds that support domestic companies.Science, technology, engineering and mathematicsThe plan would sponsor research and development partnerships between Palestinian and international companies and global research institutions.Tax and legalThe project would provide technical and financial assistance to the Palestinian public sector to transition toward a pro-growth tax structure, install improved anti-corruption measures, open capital markets, and develop regulatory reforms that support economic growth.The project would also support efforts to develop a one-stop shop for Palestinian business registration that could dramatically reduce the cost and time required to start a company.A stronger court system would better protect and secure the rights and property of Palestinian citizens.The plan would work with the Palestinian public sector to clearly define private property rights, develop institutional protections for property owners and register land ownership in a national database.Accountability (corruption)The project would enhance the capacity of Palestinian anti-corruption institutions, including their capability to investigate allegations of corruption and mismanagement, and to refer findings to competent domestic authorities without interference. That includes the internal government auditor. Freedom of the press would be encouraged.CommentsThe US plan pulls no punches - the Palestinian Authority needs to reform itself and cure corruption. Whether the PA wants this is another matter. If the PA topples the plan, it may be open to criticism.The writer is a certified public accountant and tax specialist at Harris Horoviz Consulting & Tax Ltd. leon@h2cat.com. As always, consult experienced tax advisers in each country at an early stage in specific cases.
