West Bank Arabs Threaten Strike Against Value Added Tax

Arab merchants have warned the authorities that they will call a general strike beginning July 1 if the projected value added tax (VAT) is imposed on the West Bank and in East Jerusalem. The strike decision was taken at a meeting of local chambers of commerce heads in the Arab sector held here last night. They claimed that application of the new tax to the administered territories would be “in violation of international law” and would impose an unbearable economic burden on Arab residents.

The VAT is supposed to go into effect in Israel July 1. It is a levy applied to every stage in the production of an article that adds to its value, from raw material to finished product. It is to be introduced on the West Bank as added customs duty and in East Jerusalem on the same basis as in the rest of Israel. The rate of taxation will be decided at a meeting of the Labor Alignment tomorrow and then must be approved by the Knesset finance committee. The rate is expected to be between 8-10 percent.

Treasury officials expressed some doubt today however, that the VAT will be ready by July 1. One problem is that many Israeli businesses do not keep books which are essential to administering the VAT. Finance Minister Yehoshua Rabinowitz said at a press conference in Tel Aviv today that the government would see to it that the entire business community keeps account books. But he didn’t expect the process to be completed until October. He said one measure in preparation was a bill banning government agencies from entering into business transactions with firms that did not keep books as required by law.

Another obstacle in the way of the VAT is the fact that some 70,000 merchants have not yet registered as potential VAT assesses. The National Manufacturers Association appealed to the Supreme Court today to delay the VAT until all merchants comply. Otherwise, they said, the merchants who have not registered will be able to charge lower prices for their goods and thus gain an unfair advantage over their competitors who do comply.

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