Finance Committee Holds Debate on Finance Minister’s Decision to Annul Tax Benefits to UNRWA

By Aryeh Stern

​​The Finance Committee, chaired by MK Rabbi Moshe Gafni (United Torah Judaism), held a quick debate on Tuesday on the status of Finance Minister Bezalel Smotrich’s decision to annul the tax benefits Israel grants UNRWA as a U.N. agency.

UNRWA, the United Nations Relief and Works Agency for Palestine Refugees, receives exemptions on customs duties and sales taxes on the import of various goods. It also receives exemptions on value-added tax (VAT) on imports and fuel-related taxes.

In the request for a quick debate, the MKs mentioned that “on Feb. 8, 2024, the minister of finance issued a statement to the press and wrote on social media that in light of UNRWA’s involvement in the activity of the Hamas terror organization, he has decided, by virtue of his authority, to annul all the orders and regulations that grant UNRWA an exemption from tax payments… However, despite his announcements, as of now, the minister of finance has to advance the secondary legislation procedures in the acceptable ways.” The MKs further stated that “the issue was one of national importance and should be accorded top priority status, immediately.”

In the debate, MK Yulia Malinovsky said, “UNRWA is a terror organization, for all intents and purposes. The terrorist groups Islamic Jihad and Hamas have taken over UNRWA’s workers’ association. There was a debate on this matter back in 2019. We have ​allowed the transfer of funds to the organization through our territory, and they are exempt from all the different types of taxes in the country. We all know what this organization is. We have known for years, we haven’t done anything about it, and we have allowed the transfer of funds, in cash, to the organization. Between the years 2020 to 2023, $60 million entered the Gaza Strip by way of UNRWA tenders alone. The minister of finance issued a dramatic statement to the press, and nothing has happened since.”

Asked by Committee Chair Rabbi Gafni whether these tax breaks are indeed granted to UNRWA, and what the Government’s position on the matter is, a representative of the Tax Authority said there are laws in Israel that regulate tax exemptions for UNRWA. Most of the exemptions are due to UNRWA’s status as a U.N. agency, and other exemptions are given to UNRWA specifically.

Officials from the National Security Council said the position of the Prime Minister and the Government is that UNRWA should be replaced. As part of this policy, they added, there are efforts to convince donating countries to stop the flow of funds to UNRWA. A representative of the Ministry of Justice said the annulment of the tax exemptions, as proposed, “presents legal difficulties that, in our estimation, may harm the entire [plan] to replace the organization.”

Finance Ministry Deputy Director-General Yoray Matzlawi said, “The finance minister’s instruction to cancel the exemptions remains in effect, and simultaneously the National Security Council asked to set up a taskforce, and the finance minister obliged. There are three exemptions – from excise tax, customs duties, and VAT. Within the VAT there is an exemption from purchase taxes. The exemptions are granted via directives and regulations. We have been working on the issue. I am a member of the taskforce. The first meeting was held on Feb. 13, and six more have been held since then. In the taskforce we presented the data and the Finance Ministry’s position after reviewing the data, which is that we are examining and doing everything possible in order to create alternatives to UNRWA.”

MK Eli Dallal (Likud) said, “Are we a stupid country? Suicidal? UNRWA should not exist, and should not be replaced by another body either. UNRWA was established to perpetuate the refugee issue, not to mention the education for murder and hatred of the State of Israel.”

MK Malinovsky added, “Many countries have rescinded their donations to UNRWA. There is a lot of private money there that comes from terror organizations; there is a lot of money there that comes from dubious elements. Because we are not making decisions, many countries are resuming their funding of UNRWA. Every day another country restores the funding, so long as we do not make a decision for ourselves.”

Some MKs called to declare UNRWA as a terror organization, arguing that such a measure would strip the organization of all its rights.