No time to wait: Economic discrimination against Arab towns must be fixed immediately

An immediate investment in Arab localities is not just a matter of justice – implementing government decisions would also be the right step for the Finance Ministry to take.

Nazareth  (photo credit: Wikimedia Commons)
(photo credit: Wikimedia Commons)
Why are there hardly any playgrounds for children in Arab localities in Israel? Why are the Arab authorities in such desperate economic straits? The answer, on the surface, is well known: it’s because they don’t collect municipal property taxes. But this is a false assertion that has been disseminated by many in government and the media for many years. Although it is hardly ever voiced in government offices today, its impact is still felt in the Finance Ministry’s stubborn and mistaken opposition to an increase in the balancing grants to the Arab localities.
This is the same Finance Ministry that recently published a staff report that includes a thorough analysis of the budget allocation mechanisms for Arab as compared to Jewish Israelis and of the financial situation of the Arab local authorities.
According to the document, total per capita outlays for development and services in Jewish authorities are 42 percent higher than those in Arab localities.
This figure has far-reaching implications. The level of services in Arab localities is significantly lower than that in Jewish localities. A study Sikkuy published with Injaz (Center for Professional Arab Local Governance) in 2014 investigated the claim that the sorry financial state of the Arab authorities is due to the low rate of property tax collection.
The study did identify a lower rate of property tax collection in Arab localities, but unambiguously disproved the argument that this is the main reason for their low revenue. We found that even if the Arab localities collected property taxes at the same rate as their Jewish counterparts, the revenue gap between them would decrease by only 10%.
The same government report found that “there has been a dramatic increase in the rate of property tax collections in Arab authorities over the years.”
Among other data it noted a 47% increase in the five years running through 2013.
The reason that Arab authorities have no resources is something else: they have almost no income from nonresidential property taxes – industrial and commercial zones, government properties, infrastructure facilities, and so on. This is a direct result of a deliberate and continuing government policy. The historical sin is the deliberate damage to the local economy in the Arab towns and massive expropriation of land. The state has set up industrial and employment zones, infrastructure facilities and government offices and developed the economic infrastructure almost exclusively in Jewish localities, leaving the Arab localities weak and impoverished. We do not ignore the severe administrative failings in some Arab authorities – but they would remain poor and weak even with better management and 100% collection of property taxes.
After decades of discrimination, the government now acknowledges its responsibility and is beginning efforts to make some amends. Implementation of Government Resolution 922, which calls for reducing the discrimination and revising the budget allocation mechanisms for the Arab citizens in various domains, is getting under way. This is an important and positive step that could work significant change and reduce the disparities between Jews and Arabs and better the socioeconomic status of the Arabs in Israel.
But this government policy is missing a critical and essential element: to deal with the absence of nonresidential property tax revenues, there needs to be a large increase in the budgets transferred directly to the Arab authorities as balancing grants. The Budget Division of the Finance Ministry opposes this, asserting that implementation of the program to reduce discrepancies will lead to economic development in the Arab localities, which will then produce economic stability for the authorities themselves. We share this hope, but are fiercely against the notion that after decades of discrimination against the Arab authorities, they will have to wait decades longer to achieve balanced budgets.
Furthermore, this is not just a matter of justice – it would also be a very logical step for the Finance Ministry to take. In order to receive most of the funds foreseen by Resolution 922, the local authorities must submit plans and be active. But the current economic weakness of the Arab authorities means that the bulk of their administrative resources and energies are invested in supplying the most basic services, leaving them with no real ability to raise their heads above the water. As a result, the authorities will find it difficult to make the huge organizational and professional effort required to take advantage of the budgets to be made available to them.
In advance of the approval of the 2017 State Budget, we state forthrightly that any indirect investment that does not include a major and immediate increase in the budgets of the Arab local authorities will merely perpetuate the discrimination and leave them without the capacity to provide their residents with even minimum services. An extremely large increase in the balancing grants to the Arab localities and fair distribution of property taxes on state assets are essential steps not only to rectify the years of discrimination, but also to lay the foundations for the successful implementation of the government resolution to reduce the gaps. The Finance Ministry must not miss the opportunity.
The authors are the co-executive directors of Sikkuy, the Association for the Advancement of Civic Equality.