The Palestinian Economy. Theoretical and Practical Challenges

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Zagha
need to be given access to adequate resources to do the job with which they are entrusted.
At the same time they must also be accountable for what they do with these resources.
Moreover, like all public policies, intergovernmental fiscal policies must take into
account both the political constraints facing policy makers, such as the strength of
different provinces and groups in political decisions, and economic constraints such as the
stage of development of financial markets. A synthesis of the thesis of fiscal
decentralisation and its critique is that the NGO sector should be included in the concept
of fiscal decentralisation. One approach that may be promising is that the LGUs could
contract the NGOs on competitive basis to provide the citizens of an LGU with “soft”
social services while the LGU itself can concentrate on the provision of hard
infrastructure within its jurisdiction. In tax matters, property taxes could be one important
source of revenue to LGUs but more frequent valuation of property values should be
made as basis for the tax liability calculation. Introduction of sales taxes while promising
in some other developing context is not an option for Palestine because the Palestinian
Authority (PA) has the value added tax system. What is needed in the Palestinian context
is that PA should transfer part of the VAT revenues to the LGUs in order to empower
them with enough resources to execute their duties with which they are entrusted.
4. Local Government Units (LGUs) in the Palestinian Territories
In 1995, following the Oslo Agreement signed between Israel and the PLO, the President
of the Palestinian Authority (PA) issued the Transfer of Authorities Law 21 according to
which “all authorities and powers mentioned in legislation, laws, decrees, orders in force
in the West Bank and Gaza before May 5 1994 shall be transferred to the PA”. 22 The
Transfer of Authorities Law 23 also authorised the President of the PA to enact new
legislation with the consent of the PA council. All Jordanian laws and mandate/Egyptian
laws 24 continue to be in force in the PA areas unless they have been replaced by new
Palestinian laws. Below we will review relevant laws and regulations enacted by the
21 The Law Concerning Transfer of Authorities and Powers no. 5 of 1995 was issued on April 17 1995.
Palestinian Gazette, no. 4 (May 6, 1994), p. 17.
22 Law no. 5 of 1995, article 1.
23 Ibid., article 2.
24 Approved by June 5, 1967.