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Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15Palestinians marking the 64 anniversary of al-Nakba (catastrophe) with protests, while Israeli security reacted with conducted arrests campaigns on May 15

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Today: Jul 26, 2017

Arnona Tax

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The Arnona municipal tax problem relates specifically to East Jerusalem. The Arnona municipal tax was imposed on the Palestinian population of East Jerusalem after the Israeli occupation in 1967. However, it has only recently been acknowledged as a widespread area of discrimination. The way the Arnona tax system is constructed and applied, it affects the Palestinian residents disproportionately hard and thus their ability to maintain a decent living and secure the future existence of their families in the city. Amongst Palestinian residents in East Jerusalem, there is a feeling of injustice related to the collection of Arnona taxes. The injustice felt concerns:

  • the legal basis for Arnona taxes;
  • the criteria for collection;
  • the level of taxation;
  • the implementation of the Arnona tax regulations;
  • and the sanctions applied following individual residents inability to comply with the Arnona tax requests.

Furthermore, there is injustice in relation to the way in which and to what extent Arnona taxes are returned to the Palestinian residents in East Jerusalem in the form of municipal services (see fact sheet Municipal Services).

Factual statement

The Arnona tax can be divided into residential taxes and business taxes:

Residential taxes

Arnona rates are graded by area, situation of the dwelling, neighbourhood, and construction quality, corresponding to four levels of construction and size. There are no written criteria for designation of neighbourhood, and rates can vary considerably depending on the citys arbitrary classification of the dwellings location. Arnona bills can exceed the annual rent of low-income families, for example in the Old City as this area is classified as Area A. Furthermore, the tax structure does not take into account differences in income and lifestyle. Because Palestinian houses are built to accommodate a large number of household members and are usually over 120 square meters, the rates are highest for East Jerusalem. However, area does not automatically correspond with luxury. For example, large verandas, typical for Palestinian houses, are included in the area assessments.

Businesses taxes

Commercial property is assessed and charged by size, and not by economic activity or income. Jerusalem is the only city in which the Arnona fee is unified per square meter for offices, services and commerce. Therefore, the minimum Arnona fee in Jerusalem is much higher than in other Israeli cities. This puts disproportionate burdens on independents with small businesses with lower income and more insecurity compared to big companies. Studies show that the average monthly incomes of private businesses in West Jerusalem are much higher than in East.

As to industry in the city, the gap between East and West Jerusalem is considerable. While high tech industry is booming in West Jerusalem and Intel flourishing, unemployment and stagnation dominate industry in East Jerusalem. There are no special plans to decrease unemployment, further educate the work force or develop high tech industry in East Jerusalem. 94% of the unskilled labor force in Jerusalem is Palestinians. A decline in tourism has also adversely affected income levels in Jerusalem particularly in the East. Especially since the beginning of the Al-Aqsa Intifada on 29 September 2000, the tourism sector completely collapsed.

In 1996, the Jerusalem Center for Social & Economic Rights conducted a survey on the income of private businesses in East Jerusalem as compared with the whole city of Jerusalem. According to the survey, the average monthly income in 1996 of private businesses in East Jerusalem was 3,056 NIS. (The survey was on 69 businesses randomly picked from the 2,400 businesses in Jerusalem.) According to data from The National Welfare Institute, Department of Research, the average monthly income in 1996 of private businesses in Jerusalem as a whole was 5,416 NIS. The average monthly income of private businesses in West Jerusalem alone would in other words be expected to be higher than the average for Jerusalem as a whole. Based on these data, it may be concluded that the gap between the average private business income in East and that in West Jerusalem is considerable.

The table below shows, the unified Arnona tax of Jerusalem in comparison with the Arnona tax levels of other municipalities.


Source: Israel Center of Local Government, Arnona fee survey, 1997

Two major conclusions can be drawn from the above table:

  1. Amongst the four municipalities, Jerusalem has far the highest minimum Arnona fee.
  2. Jerusalem is the only city with a non-progressive Arnona tax.

The income level in East Jerusalem is lower than in the West of the city due to various factors:

  • Due to cultural reasons, business premises are usually more spacious in East than in West. However, the spaciousness of the business in East Jerusalem is not a reflection of its economic robustness or its inherent business potential, especially as rents for businesses in East are lower than in West.
  • As a consequence of the Israeli closure and curfew policy, business activities in the eastern part of the city have long been isolated from its main source of income: Palestinians from the West Bank. In light of the political developments this state of affair is expected to continue further.
  • Israel put a strict prohibition on commercial activity of a larger scale among Palestinians, in fear of its political consequences.
  • Authorities steer tourism to the western part of the city, thus reducing revenues in the eastern part.

Recent developments

On March 11, 2002, the Israeli government approved a package of tax breaks, including Arnona and other economic incentives to aid businesses affected by attacks financially. This proposal provides businesses in downtown West Jerusalem a reduction of up to 50 percent in property (Arnona) tax over the first six months of 2002 as a start. Only businesses in downtown West Jerusalem can benefit from these tax breaks, although also the business owners in East Jerusalem have reported huge economic losses over the years and especially since the start of the second Intifada on September 29, 2000. With this decision the Israeli government completely ignores the deteriorating economic situation in East Jerusalem.

Some 250 businesses in the Old City have shut down. Most of the East Jerusalem hotels have also closed down. Some hotels have been put for auction due to the accumulation of Arnona tax debts. Some tour bus companies have been exposed to confiscation measures and put for auction. The main causes for closing down are the collapse of the tourism sector, the intensifying closure imposed on East Jerusalem, and the inability to pay accumulated municipal (Arnona) taxes.

Impact of Arnona tax

Seen on the background of the uneven socio-economic and demographic conditions and the uneven income levels between East and West Jerusalem, the collection of taxes based on unified fees disadvantages the Palestinian residents of Jerusalem. The problems concerning Arnona are widespread in East Jerusalem and bear heavy impact on the daily life of its citizens and their ability to maintain a living and secure the future existence of their families in the city.

Many Palestinian residents of the city have been subjected to various punitive measures for being unable to pay the taxes. These range from fines to seizure of property and imprisonment. If owners of both residential as well as business property are unable to pay the tax, the Municipality files a case against them, which can finally lead to the closure of the business and the auction of the real estate. With regard to property, this auction usually favours Jewish settlers. An estimated 70-80% of the Palestinian residents in Jerusalem owe the Municipality Arnona tax. The Arnona tax system thus constitutes an enormous pressure tool on the Palestinian population.

The Arnona tax policy has negatively affected the development of trade and caused several small and medium sized enterprises owned by Palestinians to close within and around the Old City. In the survey, it was concluded that of the previous 1,000 shops in the Old City, over 250 had been closed over the years.

Legal statement

The Hague Convention (IV) of 1907, including Regulations articles 48-51 on taxes etc. is applicable to Israeli law. According to article 48: If, in the territory occupied, the occupant collects the taxes, dues, and tolls imposed for the benefit of the State, he shall do so, as far as is possible, in accordance with the rules of assessment and incidence in force, and shall in consequence be bound to defray the expenses of the administration of the occupied territory to the same extent as the legitimate Government was so bound. Article 49: If, in addition to the taxes mentioned in the above article, the occupant levies other money contributions in the occupied territory, this shall only be for the needs of the army or of the administrations of the territory in question. In other words, the occupant shall respect the existing laws of the occupied territory, shall take care of the well being of the occupied population and may not benefit from collection of taxes.


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