Hamas Resorts to Tax on Cigarettes to Lessen Its Perceived Financial Woes

Gazans are trapped in their overcrowded strip by an Israeli blockade and are still struggling with the aftermath of war, but their anger today is directed at the Hamas rulers for taxing their smokes. Many see the new tax imposed on cigarettes smuggled from Egypt as a sign the Islamists are in deep financial trouble in the Palestinian territory that essentially survives on aid and a black market economy.

"Egypt has stopped the money from coming in (and) Hamas now badly needs money to pay salaries," said a local journalist, an inveterate smoker, who asked not to be named.

Since Hamas, which is committed to the destruction of the Jewish state, violently seized power in the Gaza Strip in 2007, Israel and Egypt have imposed a tight blockade, allowing in only essential and humanitarian goods.

Hundreds of tunnels that dot the border with Egypt have served to bring in other commercial goods -- anything from motorbikes to Marlboros -- as well as weapons and cash.

But Egypt has recently cracked down on the smuggling, dealing a strong blow to Hamas, which is boycotted by most banks because it is considered a terrorist organisation by Israel, the United States and the European Union.

Hamas has made it clear it plans to gradually impose sales taxes on a wide range of items in order to address the financial crisis.

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"Everybody is angry," says Hassan Abu El Kass, pointing to the stamp that shows the smokes he sells from a tiny street stall have been taxed.

The three-shekel sales tax (0.8 dollars, 0.60 euros) sent the price of a pack soaring by about 60 percent.

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"Sales are down, people can't afford such prices," says Kass. A small crowd gathers around him, expressing outrage over the tax and lashing out -- albeit quietly -- at Hamas.

One of Gaza's political factions recently warned in rare public criticism of the Islamists that there would be an "explosion" if Hamas continues collecting the new taxes.

Battling power outages that leave Gaza in the dark for hours on end, Hamas is also trying to get people to pay their electricity bills, something many residents haven't done for years.

Gaza gets about 70 percent of its electricity through power lines from Israel and five percent from Egypt, with the rest produced by the territory's sole power plant that relies on industrial fuel imports from Israel.

That plant has been working at only a fraction of its capacity since Israel imposed the blockade, receiving only 2.2 million litres of fuel a week, as opposed to the 3.5 million litres it needs.

Gazans have long been used to power cuts, but the outages have become longer and more frequent since the European Commission stopped funding fuel purchases in November.

The Ramallah-based Palestinian Authority, dominated by president Mahmud Abbas's Fatah -- the arch-foe of Hamas -- is now in charge of buying the fuel, and supplies have dropped significantly.

In March, a weekly average of 1.4 million litres of industrial fuel were imported into Gaza. That figure dropped to about one million litres in the last week of April.

The shortfall has been blamed on animosity between Hamas and Fatah, but also on a failure by consumers to pay their bills.

The Gaza Electricity Corporation (GEDCO) says it has monthly sales of about 50 million shekels (13.4 million dollars, 10 million euros) but collects only about 35 to 40 percent of the bill.

The accrued arrears of municipalities alone amounted to 413.5 million shekels (110.8 million dollars, 83.3 million euros) by January, according to GEDCO.

"People haven't been paying, Hamas hasn't been paying, municipalities haven't been paying," says Yaser Alwadeya, a Gaza industrialist and independent politician, who has pushed for Hamas to tackle the issue urgently.

In recent weeks, municipal employees have been going door-to-door to collect well-overdue payments, sometimes backed by police and technicians ready to cut off anyone who doesn't pay up.

But the power outages are still lengthy and frequent, affecting just about every sector of life from industrial plants to fishmongers, from sanitation facilities to reconstruction efforts.

And Gaza's blockade-ravaged economy was not much to start off with.

"Nothing works properly: water is not drinkable, there's barely any electricity, there are no services and banks have no money available," says Alwadeya, who says he is among the few business leaders left in Gaza.

Alwadeya's company was once the largest food maker in Gaza, but much of his production line was reduced to rubble by Israel's devastating three-week offensive launched in December 2008.

He paints a bleak picture of the situation in the narrow coastal enclave. "We no longer have an economy in Gaza. Just dealers from tunnels."

The blockade has left many Gazans struggling to eke out a living, and 80 percent of the 1.5 million population depend on food aid.

Fishermen, prevented by Israeli gunboats from venturing more than five kilometres (three miles) out to sea, now sail to the southern border to buy Egyptian fishermen's catch. Some fish is also brought in through the tunnels.

Farmers risk their lives when they venture into fields near the border wall. Citing the risk of militant attacks, Israel regularly opens fire on anyone getting too close to the boundary.

The risk does not deter hundreds of people who scavenge for construction materials among the ruined buildings by Gaza's northern border with Israel, using horse-drawn carts to carry their heavy loads.

The closer they get to the border wall, the better the materials, and the higher the risk of getting shot.

A little farther back, a cloud of dust rises from a spot where dozens of people collect pebbles that will be crushed and mixed into concrete.

"It's hard work, it's dangerous," says 12-year-old Motaz as he sifts through the sand just a few hundred metres from the border.

Asked if he'd rather be at school, he mops his brow with a corner of his dusty Mickey Mouse T-shirt, adjusts his red baseball cap and shrugs.

"We need the money."

Source-AFP
TAN