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Tax policy has played a significant role in perpetuating the Israeli occupation of Palestinian territories, raising questions about global accountability and future state-building efforts.
Taxation as a Tool of Occupation and Control
Taxation is more than a mere financial tool. For Palestinians, the denial of tax sovereignty under Israeli occupation has been a pivotal aspect of their ongoing struggle for self-determination. This article examines how Israel’s control over taxation in the occupied Palestinian territories functions as a mechanism of control, and how international tax policy and incentives have further entrenched the occupation. The challenge ahead lies in reversing these injustices and ensuring that a future Palestinian state can thrive through full tax sovereignty.
International Law and the Palestinian Struggle for Sovereignty
The Israeli occupation of Palestinian territories—comprising the West Bank, Gaza Strip, and East Jerusalem—has been declared illegal under international law. The International Court of Justice (ICJ) has unequivocally ruled that Israel’s occupation regime violates multiple international conventions, including those prohibiting apartheid and racial segregation. A 2024 opinion from the ICJ further highlighted that Israel’s actions in Palestine may amount to genocide, as indicated by the disproportionate violence inflicted on Palestinian civilians, particularly in Gaza.
As international pressure grows for the establishment of a Palestinian state, it is crucial to understand the role that taxation—and the denial thereof—has played in the continued subjugation of Palestinians. Tax sovereignty, often a foundational pillar for statehood, is vital for a functional government that can provide services and represent the interests of its people.
Tax Under Occupation: The Struggle for Financial Sovereignty
For a state to thrive, it must have control over its revenue streams—primarily through taxes. Under occupation, Palestinians have been deprived of this fundamental right. Since 1967, Israel has controlled a significant portion of Palestinian taxation, including customs duties, which restricts the Palestinian Authority’s ability to govern effectively.
Studies show that effective tax systems are central to ensuring public spending is targeted at crucial services such as healthcare, education, and infrastructure. By withholding tax revenues and exerting financial control, Israel has severely limited the Palestinian Authority’s capacity to address the needs of its population and build a functioning state.
In 2025, it was reported that Israel had withheld US$1.8 billion in taxes owed to the Palestinian Authority—taxes collected on behalf of Palestinians, but not returned. This practice undermines Palestinian self-governance and contributes to the worsening economic and humanitarian crisis in the territories.
Tax Incentives Supporting the Expansion of the Occupation
Tax incentives have also been used as a tool to incentivize and sustain Israeli settlements in the occupied territories. These settlements, considered illegal under international law, have been supported by various tax breaks and financial incentives from the Israeli government.
Multinational companies—such as Airbnb, Booking.com, and Caterpillar—have been linked to business operations within the settlements, despite their illegality. These companies benefit from tax structures that encourage settlement expansion. Human rights organizations have long pointed out that these businesses profit from an internationally condemned occupation, making them complicit in the violation of Palestinian rights.
In many countries, tax laws have been exploited to support these activities. Charitable organizations, for instance, can benefit from tax-exempt status even when they fund or endorse the expansion of Israeli settlements. Recent legislative efforts, such as New York’s ‘Not on Our Dime’ Act, aim to curb such tax incentives that support internationally unlawful activities.
The Global Tax System and Palestinian Justice
Global tax policies have significant implications for the Palestinian struggle for justice and self-determination. Many countries, including the US and UK, provide military and economic support to Israel, contributing to the violence and systemic discrimination that Palestinians face. These countries’ tax revenues are indirectly supporting the occupation and may even violate international law in doing so.
International bodies and taxpayers worldwide have a role to play in challenging these practices. By questioning the allocation of public funds and ensuring that tax incentives do not support unlawful occupation or violations of human rights, global citizens can exert pressure on their governments to change course.
The Road Ahead: Tax Justice and Palestinian Statehood
The future of Palestinian statehood depends heavily on the establishment of tax sovereignty. If Palestine is to become a fully functioning state, it must have control over its own taxation system, enabling it to fund public services and pursue equitable economic development. This is not just a matter of financial autonomy, but a critical component of self-determination.
As the international community continues to push for the recognition of Palestine as a sovereign state, addressing the injustices perpetuated through tax policies will be essential. Efforts to challenge tax incentives that support the occupation and hold businesses accountable for their role in the settlements will be crucial in shifting global attitudes and dismantling the structures that perpetuate the occupation.
Tax justice must be seen not just as a tool for domestic policy, but as a critical lever for decolonization and the establishment of a just and sustainable peace in Palestine.
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