READING INTERNATIONAL MODEL UNITED NATIONS

2nd Annual Conference 29th November 1st December

ECONOMIC AND FINANCIAL COMMITTEE

A message from your directors:

Dear ECOFIN delegates, I am honored and privileged to welcome you as the Chair of the Economic and Financial committee at Reading International Model United Nations conference 2013. Together with yourselves and my cochair this committee will have the chance to face some of the most important topics that have an impact on the human financial life. The topics for the Economic and Financial Committee this year revolve around emerging trends that will have an immense impact on the global economy. Firstly we have the opportunity to discuss the topic of tax evasion and tax havens. Recent events have demonstrated that countries from all over the world face a growing problem in collecting taxes to fund public goods and services such as healthcare, education, infrastructure and the general reduction of poverty in developing countries. This effect of globalisation undermines the fiscal basis of the welfare state. Though markets have become more integrated, tax structures have remained nation-specific. Open borders have created exaggerated tax competition, which in turn has led to a race to the bottom in taxation of companies and high incomes. Furthermore we will talk about the Permanent sovereignty of the Palestinian people in the Occupied Palestinian Territory, including East Jerusalem, and of the Arab population in the occupied Syrian Golan over their natural resources. Israeli settlements in the Occupied Palestinian Territory and the occupied Syrian Golan not only are illegal but also constitute an obstacle to peace. The international community should exert all possible efforts to ensure the implementation of international law and relevant United Nations resolutions. These efforts should include providing support for initiatives that seek to end the Israeli violations of international law in the occupied territories, especially Israeli settlement activities, as a first step towards a final and just resolution to the conflict that ends the occupation and allows the attainment of the inalienable rights of the Palestinian people, as guaranteed by international law.

But the most important part during the whole MUN experience is your participation. Your vision and your professionalism will make the ECOFIN one of the best committees of Reading Mun. It is our responsibility to guide you and we are at your disposal. Please do not hesitate to contact us we are here to help you to answer to your questions and also meet you in person. Loz and I truly believe in your energy and passion. We are very much looking forward to welcoming and meeting you all this November. Best Regards Panourgias Papaioannou. Chair of the Economic and Financial Committee of Reading International Model United Nations 2013 IInd Session Loz Simpson. Co-Chair of the Economic and Financial Committee of Reading International Model United Nations 2013 IInd Session

History of ECOFIN The Economic and Financial Committee, otherwise known as ECOFIN, was first formed when United Nations first received its charter in 1945. Meeting first in London in January of 1946, they made their first decision to move headquarters to New York City in the United States. It is the second of six main committees that make up the General Assembly. The Economic and Financial Committee foremost focuses discussion on the economic and financial policies regarding growth, trade and developing sectors of the world economy. The second committee also takes into consideration special situations regarding LDCs, Less Developed Countries, and LLDCs, Land-Locked Less Developed Countries. Structure and Responsibilities ECOFIN consists of one chairperson, three vice-chairpersons and one rapporteur, chosen to represent the geographic regions evenly. Meeting

once a year in October for a four to five - week session, ECOFIN is open for all 192 member states of the United Nations to attend. The Second Committee works to draft resolutions that seem to fit the needs of all of its members best. ECOFIN takes great consideration when coming upon special cases like LDCs and LLDCs when in session and is able to take action upon the resolutions. To ensure efficiency during session, the second committee is continuously updating its working methods and practices to ensure better debates and discussion on the floor.

TOPIC A: Dealing with tax havens and combating money laundering and tax evasion through international cooperation. 1)Definition of the tax havens There is no precise definition of a tax haven. The OECD initially defined the following features of tax havens: 1. no or low taxes, 2. lack of effective exchange of information, 3. lack of transparency, 4. no requirement of substantial activity. Other lists have been developed in legislative proposals and by researchers. Also, a number of other jurisdictions have been identified as having tax haven characteristics. Formal Lists of Tax Havens The OECD created an initial list of tax havens in 2000. A similar list was used in S. 396, introduced in the 110th Congress, which would treat firms incorporated in certain tax havens as domestic companies; the only difference between this list and the OECD list was the exclusion of the U.S. Virgin Islands from the list in S. 396. Legislation introduced in the 111th Congress to address tax haven abuse (S. 506, H.R. 1265) uses a different list taken from IRS court filings, but has many countries in common. The definition by the OECD excluded low-tax jurisdictions, some of which are OECD members, that were thought by many to be tax havens, such as Ireland and Switzerland. These countries were included in an important study of tax havens by Hines and Rice. GAO also provided a list.

Table 1 lists the countries that appear on various lists, arranged by geographic location. These tax havens tend to be concentrated in certain areas, including the Caribbean and West Indies and Europe, locations close to large developed countries. There are 50 altogether. Table 1. Countries Listed on Various Tax Haven Lists Caribbean/West Indies Barbuda,Aruba Virgin Islands, Cayman Islands, Dominica, Grenada, Montserrata Netherlands Antilles, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Turks and Caicos, U.S. Virgin Islandsa,e Anguilla, Antigua and Bahamas, Barbados,d,e British

Central America Rica,b,c Panama

Belize, Costa

Coast of East Asia Singaporeb

Hong Kong,b,e Macau,a,b,e

Europe/Mediterranean and Jersey),e Luxembourg,a,b,e

Andorra,a Channel Islands (Guernsey Ireland,a,b,e Liechtenstein,

Malta,MonacoSan Marino,a,e Cyprus,eGibralter,IsleofMan,e Switzerlanda,b Indian Ocean Seychellesa,e Maldives,a,d Mauritius,a,c,e

Middle East Lebanona,b

Bahrain, Jordan,a,b

North Atlantic Pacific, South Pacific Samoa,Nauru

Bermuda Cook Islands, Marshall Islands,a Tonga,a,c,d Vanuatu, Niue

West Africa

Liberia

Sources: Organization for Economic Development and Cooperation (OECD), Towards Global Tax Competition, 2000; Dhammika Dharmapala and James R. Hines, Which Countries Become Tax Havens? Journal of Public Economics, Vol. 93, 0ctober 2009, pp. 1058-1068; Tax Justice Network, Identifying Tax Havens and Offshore Finance Centers: http://www.taxjustice.net/cms/upload/pdf/Identifying_Tax_Havens_Jul_0 7.pdf. The OECDs gray list is posted at http://www.oecd.org/dataoecd/38/14/42497950.pdf. The countries in Table 1 are the same as the countries, with the exception of Tonga, in a recent GAO Report, International Taxation: Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions, GAO-09-157, December 2008. 2)Developments in the OECD Tax Haven List The OECD list, the most prominent list, has changed over time. Nine of the countries in Table 1 did not appear on the earliest OECD list. These countries not appearing on the original list tend to be more developed larger countries and include some that are members of the OECD (e.g., Switzerland and Luxembourg). It is also important to distinguish between OECDs original list and its blacklist. OECD subsequently focused on information exchange and removed countries from a blacklist if they agree to cooperate. OECD initially examined 47 jurisdictions and identified a number as not meeting the criteria for a tax haven; it also initially excluded six countries with advance agreements to share information (Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius, and San Marino). The 2000 OECD blacklist included 35 countries; this list did not include the six countries eliminated
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due to advance agreement. The OECD had also subsequently determined that three countries should not be included in the list of tax havens (Barbados, the Maldives, and Tonga). Over time, as more tax havens made agreements to share information, the blacklist dwindled until it included only three countries: Andorra, Liechtenstein, and Monaco. 3) Features of Havens -While almost any jurisdiction can have some tax haven elements, rarely can it be defined as a `pure tax haven. The central feature of a haven is that its laws and other measures can be used to evade or avoid tax laws or regulations of other jurisdictions. -The minimization of tax liability is also an important element of tax havens. This is a function of: (i) the use of paper or `shell companies, trusts and other legal entities ; (ii) routing and managing financial flows. -Generally, tax havens offer particular privileges, such as a zero or significantly low tax rate to non-residents or legal entities owned by foreign individuals. -Pure tax havens have laws tailored to the aforesaid objectives, aiming to attract the financial and corporate services business. Said sector constitutes a large portion of their economic output. -What is more, secrecy is at the core of their operations. There are two types of secrecy: (i) bank secrecy: limited access to banking/financial institution information as far as tax collection is concerned; (ii) secrecy of legal entities: lack of information availability on companies, corporations, trusts, foundations, or other legal entities. Concealed information includes (but is not limited to) data on shareholders of a company, beneficiaries of a trust or individuals in charge of controlling the use of assets and financial accounts. As a conclusion, defining a tax haven may be more complicated than it seems. Generally, low tax rates and the presence of financial and legislative Secretiveness are phenomena that are present in the definition of said entities.

4)Method of Corporate Tax Avoidance

Multinationals companies are not taxed on income earned by foreign subsidiaries until it is repatriated to the country parent as dividends, although some passive and related company income that is easily shifted is taxed currently under anti-abuse rules referred to as Subpart F. (Foreign affiliates or subsidiaries that are majority owned country owned are referred to as controlled foreign corporations, or CFCs, and many of these related firms are wholly owned.) Taxes on income that is repatriated (or, less commonly, earned by branches and taxed currently) are allowed a credit for foreign income taxes paid. (A part of a parent company treated as a branch is not a separate entity for tax purposes, and all income is part of the parents income.)
One method of shifting profits from a high-tax jurisdiction to a low-tax

one is to borrow more in the high-tax jurisdiction and less in the low-tax one. This shifting of debt can be achieved without changing the overall debt exposure of the firm. A more specific practice is referred to as earnings stripping, where either debt is associated with related firms or unrelated debt is not subject to tax by the recipient. As an example of the former earnings stripping method, a foreign parent may lend to its U.S. subsidiary. Alternatively, an unrelated foreign borrower not subject to tax on U.S. interest income might lend to a U.S. firm. The second major way that firms can shift profits from high-tax to lowtax jurisdictions is through the pricing of goods and services sold between affiliates. To properly reflect income, prices of goods and services sold by related companies should be the same as the prices that would be paid by unrelated parties. By lowering the price of goods and services sold by parents and affiliates in high-tax jurisdictions and raising the price of purchases, income can be shifted. 5)The Consequences: Estimated Tax losses Half of the world trade appears to pass through tax havens, although they account for only 3% of the worlds GDP. The value of the assets held offshore, either tax-free or subject to minimal taxes, is at least USD 11 trillion -over one third of the worlds annual GDP. Consequently, an estimate for the U.S in 2010 put corporate tax losses in the range of $10 to $20 billion13. That said, large-scale and reputable corporations do not usually resort to secrecy. They are just engaged in tax planning, hence altering the location of gains and losses via transfer pricing and

advantageous lending/borrowing. Consequently, they are often challenged by tax officials and have developed a response mechanism in case of potential allegations. A number of different approaches have been used to estimate corporate tax avoidance, however, all of these approaches rely on data reported on assets and income. For individual evasion, estimates are much more difficult because the initial basis of the estimate is the amount of assets held abroad whose income is not reported to the tax authorities. In addition to this estimate, the expected rate of return and tax rate are needed to estimate the revenue cost. The Tax Justice Network has estimated a worldwide revenue loss for all countries of $255 billion from individual tax evasion, basically using a 7.5% return and a 30% tax rate.These assumptions would be consistent with a $33 billion loss for the United States using the $1.5 trillion figure. Their worldwide numbers are consistent with $11 trillion in offshore wealth. Their more recent estimates place wealth at $21 trillion to $32 trillion, which would double or triple these estimates. Thus the cost for the United States could be much larger approaching $100 billion. 6)Responding to the Financial Threat of Tax Havens At the 2002 European Social Forum in Florence, European NGOs and social movements active in the field of financial criminality founded the European Tax Justice Network (TJN)16 to combat tax evasion. Such action was taken due to the then-recent economic globalization which inhibited government ability to tax wealthy beneficiaries and large corporations adequately. The TJN found that said globalization tendencies have disturbing implications for democracy, public services as well as individualsmaterial and non-material well-being. At the 2013 World Social Forum (WSF) in Porto Alegre, the Network was expanded globally by Northern and Southern American organizations. The WSF of Mumbai in January 2004 extended it to Asia. Currently, the Network needs support from Africa, so as to further enhance its international character. The TJN aims to: Eliminate cross-border tax evasion; Limit the scope for tax avoidance; Publicize issues and educate interested parties;

 Advocate said issues on an international level, within the UN, IMF, OECD, EU, etc.; Encourage, support and coordinate national and regional activities; Create a network among interested parties around the world; Encourage research and debate on tax evasion-related matters. In Porto Alegre, the TJN discussed a draft Declaration/Manifesto. The document contains the following important strategic points: Eliminating cross-border tax evasion and limiting the possibility of tax avoidance, so that large corporations and wealthy individuals pay tax in line with their ability to do so; Increasing citizens influence in the democratic control of taxation and restricting the power of capital to dictate tax policy solely in its own interest; Restoring a standardized tax treatment of different forms of income and lifting tax incidence in the case of ordinary citizens; Removing the tax and secrecy incentives that encourage the outward flow of investment capital from countries most in need of economic development.

7)Using Offshore Accounts to evade Tax Obligations: the Issue of Money Laundering A basic barrier to identifying a regulatory breach, and, thus, a tax offence, is the normative variety within jurisdictions. For instance, a certain number of countries do not raise government revenues via income taxes. Hence, income tax evasion is not considered a crime in said states. In recent years, however, several inter-governmental bodies have sought to create a climate where tax investigations can be conducted across borders. Consequently and, by the application of laws, these bodies general purpose is to treat any issue of financial fraud as not one of tax collection but one of a criminal offence. The aforesaid fact is one area of considerable concern but it pales in comparison with the greater picture of how said inter-governmental bodies are pressuring governments to change domestic laws. The issue is simply one of sovereignty violation. In light of the above, efforts are being made to discourage financial institutions in some countries from being excessively involved in the affairs of their counterparts in others.

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Whether tax crimes are a predicate offence in the context of money laundering legislation is a question of the express provision of the counter-money laundering laws, or the interpretation of these laws by Courts. In countries that have all-crime counter- money laundering laws, it is almost certain that tax crimes will fall within the catch-all provisions. As a conclusion tax offences fall on the border of what is and what not laundering Money Laundering Case: If a person who is liable for the payment of a 40% marginal rate of income tax receives a 100 salary and fails to declare it, then the 40 is money "stolen" from the Treasury. Therefore, they do not launder the 100 - they launder the 40. It is the tax evaded that is laundered. One complication that makes this difficult to understand is that, in order to retain the 40, the individual actually puts the whole 100 through the laundering process. They have to demonstrate that they received 100 legitimately, in order to evade a payment of 40. Another complication is that the 40 is said to have been "commingled" with the remaining 60, thus staining the otherwise clean money. Therefore, under the general principles of asset seizure, anything that is purchased with the 60 may be subject to freezing or forfeiture.

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8)Basic Methods of Money Laundering Connected to Tax Evasion Wire transfers or electronic banking: The primary tool of money launderers to move funds around in the banking system. These moves can conceal the illicit origins of the funds or just place the money where the launderers need them. Often, the funds go through several banks and even different jurisdictions. Cash deposits: Money launderers need to deposit cash advances to bank accounts prior to wire transfers. Due to anti-money-laundering regulations, they often structure the payments, i.e. break down large to smaller amounts. This is also called smurfing. Informal value Transfer systems (IVTS): Money launderers need not rely on the banking sector. Other transfer providers, such as the Hawala or Hindi are readily available to undertake fund transfers. These systems consist of shops (mainly selling groceries, phone cards or other similar items), which are also involved in transfer services. IVTSs enable international fund transfers, as these shops are present in several jurisdictions. Cash smuggling: Money launderers might mail, Fedex or simply carry cash with them from one region to another, or even to different jurisdictions. Gambling: Casinos, horse races and lotteries are ways of legalizing funds. The money launderer can buy (for dirty cash) winning tickets or, in the case of casinos, chips and redeem the tickets or the chips in a clean bank check. Afterwards, the check can be easily inserted into in the banking sector. Insurance policies: Money launderers purchase single premium insurance (with dirty cash), redeem early (and pay some penalty) in order to receive clean checks to deposit. Longer-term premium payments might make laundering even harder to detect. Securities: Usually used to facilitate fund transfers, where underlying security deals provide cover (and legitimate-looking reason) for transfers.

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 Business ownership: Money might be laundered through legitimate businesses, where laundering funds can be added to legitimate revenues. Cash-intensive operations, such as restaurants, are especially well-suited for laundering. Shell corporations: Money launderers might create companies exclusively to provide cover for fund moves without legitimate business activities. Purchases: Real estate or any durable good purchases can be used to launder money. Typically, the item is bought for cash and resold for clean money, such as bank checks. Credit card Advance payment: Money launderers pay money in advance with dirty money, and receive clean checks on the balance from the bank ATM operations: Banks might allow other firms to operate their ATMs (i.e. to maintain and fill them with cash). Money launderers fill ATMs with dirty cash, and receive clean checks (for the cash withdrawn) from the bank.

9)Global Community Response In 2009, the G20, pursuant to the pressing demands of a majority of countries and having to deal with huge amounts of lost revenues, declared zero tolerance towards tax havens. The era of bank secrecy is over, officials leaving the G20 Summit stated. Despite the fact that measures were taken to secure capital transparency through large-scale multilateral cooperation, deposit data from the Bank of International Settlements (BIS) indicates that bank accounts in tax havens still contained $2.7tn (1.7tn) in 2011 (almost identical to the 2007 amount). Bank secrecy is still an issue and tax havens continue to thrive. Information exchange systems have not, as of now, lived up to the international communitys expectations. Niels Johannesen and Gabriel Zucman researching on BIS data stated: so far, the G20 tax haven crackdown has largely failed. Treaties have led to a modest relocation of bank deposits among tax havens but have not triggered significant flows of funds out of tax havens. . Despite their large number, fiscal information exchange agreements
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signed with tax havens do not provide information automatically, but only upon request. Each year, Her Majestys Revenue and Customs (HMRC) automatically receives millions of reports from British banks about the amount their customers earned in interest and dividends. This information makes tax evasion via UK bank accounts very hard. However, under an existing UK-Swiss agreement, for instance, the HMRC can request information from Swiss authorities only if they have a well-documented suspicion that a UK resident has evaded tax payments. However, this information is difficult to obtain. That said, ever since zero tolerance was declared, tax havens have signed more than 700 upon request information exchange agreements. Why is there, however, approximately as much cash in tax havens today as there was several years ago? Bank deposits held by foreigners in tax havens amounted to around $2,700 billion in 2009, according to the Bank for International Settlements. This figure has slightly increased today. Evidently, there has been no substantial repatriation of funds since the London G20 in 2009. Tax evaders, on the other hand, have been quick in responding to the upheavals caused within the offshore operations world after 2009. They have tried to secure their income and reserves from taxation by doing exactly what they did before. The only difference is that, currently, they tend to avoid tax heavens that have signed upon request information exchange agreements. Merely the fact that tax heavens accepted to discuss information exchange systems ought to be considered as innovative. Quantitatively speaking, however, progress is very modest to start discussing the the end of bank secrecy. There are, however, feasible methods to significantly improve tax collection. It takes political will from all countries to encourage and convince tax havens to sign treaties internationally. A truly global agreement would prevent tax evaders from transferring their funds from haven to haven. As an overall conclusion, it is the global communitys responsibility to earn the trust and support of tax havens. At the same time, it must use diplomatic pressure in order to establish information exchange systems among tax havens and pertinent international organizations. This would, in turn result in a more efficient tax mechanism and an optimized tax collection process.

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10)Questions a Resolution May Consider 1. Countries defined as tax havens and/or OFCs exhibit varying levels of economic performance. Would standardized measures in response to their activity be efficient or would a case-by-case approach be more effective in comparison? 2. Should tax havens and OFCs each be addressed differently? 3. What are the main tax haven/OFC jurisdiction cases that should be addressed via a Resolution? 4. How can multilateral information exchange agreements signed with tax havens be further improved? 5. How can other members of the international community contribute to the plan of action already proposed by the G20? 6. How does the presence of the 2nd Committee assist in the fight against financial and fiscal crime? 7. What incentives could tax havens and OFCs be provided with so as to further cooperate with other jurisdictions on said issues?

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11)Bibliography and Further Reading:

Briefing Paper: Tax Information Exchange Arrangements http://www.taxjustice.net/cms/upload/pdf/Tax_Information_Exchange_A rrangements.pdf b.) Tax Justice Network Closing the floodgates http://www.taxjustice.net/cms/upload/pdf/Closing_the_Floodgates_-_1FEB-2007.pdf c.)The Price of Offshore http://www.taxjustice.net/cms/upload/pdf/Briefing_Paper__The_Price_of_Offshore_14_MAR_2005.pdf d.) Information Exchange: What would help developing countries now? http://www.taxresearch.org.uk/Documents/InfoEx0609.pdf

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TOPIC B: Permanent sovereignty of the Palestinian people in the Occupied Palestinian Territory, including East Jerusalem, and of the Arab population in the occupied Syrian Golan over their natural resources. Introduction The conflicts, disputes and failed peace talks from the Israeli occupied regions continue to blight attempts to create a peace and stability in the region. Although the jurisdiction of the ECOFIN committee does not allow it to create a formal and binding peace agreement in the region, it does have the power to lay the foundations of a greater peace agreement in the future. If the ECOFIN committee can form an agreement regarding the sovereignty natural resources in the region as well as liberties towards those living in occupied territories to build a solid and sustainable economy then, perhaps, further developments can be made in creating a longer and greater peace in whatever way the Israelis and Palestinians choose for themselves. THE BACKGROUND In June 1967, Israel formally annexed 70km2 of land from the West Bank Palestinians, including East Jerusalem and many nearby villages. Currently this land is home to nearly 500,000 Israelis. Under international law these settlements are illegal, however Israel disputes these claims. Furthermore, as Israel insists that this territory should be under Israeli jurisdiction, yet this has not been recognised by the United Nations or any other international body. To date, Israel has seized over 1000 km2 of Palestinian land, accounting for approximately 40% of the West Bank and paced it within the jurisdictional boarders of local and regional settlement councils. DISPLACEMENT OF PALESTINIAN PEOPLE BY ISRAELI POLICY Since 1967, Israel has pursued a strategy of destabilising East Jerusalem. This has included physically isolating East Jerusalem with the building of the Wall, land expropriation and demolition of houses, revoking the residency and social benefits of Palestinians and unequal distribution of municipal budgets to East Jerusalem. The combination of these effects has led to a severe deterioration of living conditions for Palestinian settlers in East Jerusalem. Leading human rights organisations also note
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that at least 28 Palestinian organisations operating in East Jerusalem involved in educational, cultural and social activities have been closed down by Israel. The Israeli government continues to forcibly evict Palestinian settlers from their homes in East Jerusalem, in clear violation of International Human Rights Laws, contributing to the changing demographic of the East Jerusalem population displacement, property destruction and confiscation. Inside the Gaza Strip, Israeli military operations have been the main cause of forced displacement. The Israeli operation in November 2012 saw an estimated 3000 Palestinians displaced as their homes were either destroyed or severely damaged. In January 2013, 139 structures, including 59 residential structures, were severely damaged in 20 separate incidents. There are also a number of cases where Israeli forces have confiscated or destroyed emergency shelters and other emergency response items.

THE WALL Israel began building the Wall in 2002, citing security reasons including the plan to stop the flow of potential suicide bombers into Israel from the West Bank. In 2004 the ICJ concluded that the Wall and its associated regime are contrary to International law. It stated that Israel was obligated to cease construction of the wall with immediate effect. Israel chose to ignore this advice, and construction continued. The wall does not sun along recognised boarders, biut through the West Bank and acts to actively encircle Israeli settlements; it is believed that Israel will use the wall route as a de-facto annexation of the lands on Israeli side. In total, this amounts to around 9.4% of West Bank territory including some of their most fertile lands. Any Palestinian on the Israeli side of the Wall is required to obtain a permanent resident permit from Israeli authorities if they wish to continue to live there. Comparatively, Israelis and foreign visitors have unrestricted access to the same areas. Palestinian farmers whose lands lie within the Israeli side of the wall must apply for permits from Israel for access to their land as well as the right to farm it themselves. They also must obtain permits for any Palestinian workers on the land. Both sets of permits have proven to be difficult to obtain from the Israeli authorities.

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EXPLOITATION, ENDANGERMENT AND DEPLETION OF PALESTINIAN NATURAL RESOURSES Israel controls almost all Palestinian water resources and exploits around 89% of the available water, leaving only 11% to the Palestinians. Recent figures indicate a per capita consumption at below 70 litres per day for Palestinians in the West Bank, while Israelis living in illegal settlements enjoy access of up to 450 litres per day. Wells and springs that are available to Palestinians are generally degraded, as the Israeli authorities deny Palestinians permits for installing, upgrading or protecting their water sources to provide sufficient quantities, while they simultaneously continue to drill deeper and more efficient wells for Israeli use. Furthermore, the construction of the Wall has damaged, destroyed or made inaccessible vital sources of water, such as wells, cisterns and springs, which, once damaged, can rarely be repaired or replaced owing to planning restrictions. In addition, Palestinians are denied access to what are supposed to be shared water resources, such as the Jordan River. The targeting of water sanitation and hygiene facilities by the Israeli authorities, including basic systems and facilities funded by international donors, was increased in 2012. In the first nine months of 2012, 33 water infrastructure facilities and 16 sanitation infrastructure facilities were demolished, affecting over 1,500 persons. The increased pressure on available water resources, combined with the blockade and continued Israeli military strikes, has damaged water resources, exacerbating the water crisis in the Gaza Strip. Palestinians in Gaza have resorted to over extraction from the coastal aquifer. This has caused the water table to drop below sea level and saline water and other pollutants to intrude, rendering 90 to 95% of the water unfit for human consumption. The four wastewater treatment plants in the Gaza Strip have limited treatment capacity and efficiency.82 As a result; about 89 million litres of untreated or partially treated sewage are discharged directly into the sea every day, posing a potentially serious health and sanitation hazard. The sanitation crisis is further compounded by approximately 40,000 cesspits in use in Gaza, of which 84 per cent are manually emptied by household members owing to the lack of connections to the sewage network. In 2012 alone, three children drowned in pools of open sewage that cannot be adequately addressed as long as the blockade hinders sanitation development. In the West Bank, excluding East Jerusalem, only 31 per cent of Palestinians are connected to the sewage network. Only one wastewater treatment plant is operational owing to the Israeli authorities refusal to grant the necessary permits for the development of sanitation and wastewater treatment infrastructure. As a result, almost 40 to 50 million
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cubic metres of sewage each year reach natural drainages as untreated sewage. Israeli settlements in the West Bank, including East Jerusalem, generate 54 million cubic metres of domestic wastewater annually, with much of it entering the environment untreated. Apart from wastewater, solid waste from the settlements is dumped without restriction on Palestinian lands, fields and side roads, or is burned. Several polluting industries were relocated from Israel to the West Bank, including aluminium, tanning, plastics and electroplating, and do not abide by any environmental laws. The industrial waste produced by these industries and other Israeli industries located in the West Bank is disposed of on the nearby Palestinian agricultural lands, thereby constituting a threat to the environment. The wall also obstructs the flow of surface water, with trapped water causing flooding and the degradation of adjacent agricultural lands, especially since Palestinians are not permitted to approach and clear the blockages in drainage pipes under the wall. The construction of the wall has caused physical separation as well as compaction of the soil, uprooting of trees and loss of agricultural land. The uprooting of trees leaves soils exposed and exacerbates land degradation. Farmers have been compelled to leave their lands barren because of the wall, losing a valuable source of reliable income and exposing the soil to erosion. The construction of the wall has also altered and destroyed the natural habitats of a number of species, threatening biodiversity and depleting ecosystems. Common floral and faunal species are under serious threat of becoming rare, with some very rare species potentially disappearing altogether. About 22 terrestrial animal species are also under the threat of extinction, as the wall negatively impacted habitat fragmentation and prevented the movement of mammals for food and mating. ECONOMIC & SOCIAL CONDITIONS INSIDE THE WEST BANK The economic growth in the West Bank and Gaza Strip continues to be unsustainable and restrained by the policies of the Israeli occupation, namely restrictions on movement and access. Reflecting the slowdown in economic activity, unemployment in the West Bank and Gaza remained stubbornly high and rose to 22.9% in the fourth quarter of 2012 from 21% during the same period in 2011. This indicates that labour-intensive tradable sectors are excessively and disproportionately impacted by Israeli occupation policies. Unemployment has been much higher in Gaza (averaging 33.5% in 2010 and 2011) than in the West Bank (17% in 2010 and 2011). By the end of 2012 this pattern persisted; the West Bank unemployment rate was 18.3
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per cent, while it stood at 32.2 per cent in Gaza. The persistence of high unemployment in the West Bank can be attributed, among other things, to low levels of private sector investment, particularly in the areas where investment is highly restricted. Overall wage growth lagged behind inflation, leaving 2011 average real wages 8.4% lower than their level five years earlier. Real wages have fallen over the past decade at all education levels. For example, among those with five years of schooling, real wages were about 30% lower in 2009 compared to 1999 and among those with 16 to 18 years of schooling; wages in 2009 were lower by 10%. In 2011 slightly more than one of four (25.8%) individuals in the West Bank and Gaza were living below the poverty line (17.8% in the West Bank and 38.8% in the Gaza Strip). Similarly, about 12.9% of individuals were living below the deep poverty line in 2011 (7.8% in the West Bank and 21.1% in the Gaza Strip). One significant feature of poverty in the West Bank and Gaza is that many Palestinians have consumption levels that are just above the poverty line, implying that in the event of an economic shock they could easily fall below the poverty line. Furthermore, more than 5,000 Palestinian businesses in Jerusalem have closed their doors since 1999. The withholding and redirection by Israel of tax revenues it collects on behalf of the Government of Palestine, and the decline in donor support observed in 2011 and 2012 had a negative impact on growth and exacerbated a deep fiscal crisis. In November and December 2012 Israel temporarily withheld Palestinian tax revenues as a punitive step in light of the November vote admitting Palestine as a non-member Observer State to the UNGA. This led to the delay of the payment of salaries to civil servants, who have embarked on strikes in protest since mid-December 2012. The key long-term constraints blocking the emergence of a strong economy are the loss of Palestinian natural resources, land and water to occupation and settlements, and the isolation of Palestinian producers from regional and global markets, leading to their limited ability to procure production inputs and to export their goods and services. FOOD SECURITY The Food and agriculture organisation of the United Nations (FAO) maintains that while food security levels have improved throughout the Occupied Palestinian Territory, these gains are uneven and temporary in nature. More than 40% of Palestinian households are classified as food insecure or vulnerable to food insecurity. After assistance, 1.3 million Palestinians (27% of Palestinian households) are food insecure and unable to meet their basic food and household
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expenses. In the West Bank, post-assistance food insecurity still reaches 17%, while these rates in the Gaza Strip reach up to 44%. In the Gaza Strip, UNRWA distributes food to over 700,000 refugees. Without improvements in the economy, which can only come about with the lifting of the blockade, that figure could rise to over 900,000. The World Food Programme distributes food aid to an additional 300,000 persons but even so, about 44% of recipients of food assistance remain food insecure. THE OCCUPATION OF THE GOLAN HEIGHTS As with East Jerusalem, Israel took control of the Golan Heights after the 6 day war in 1967. In 1981 Israel formally annexed the area. In response, the United Nations Security Council passed resolution 497 ruled this Israeli annexation as null and void and its status as part of Israel would not be recognised under International Law. Today, an estimated 19,000 Israelis live in the Golan area in 33 settlements which accounts for roughly half of the population of the area with the other half being Syrians who have remained. Israel persists in implementing legal and administrative measures to provide socioeconomic incentives, security, infrastructure and social services to settlers residing in the occupied Syrian Golan (which amounts to the illegal transfer of its population into occupied territory), whereas the five remaining Syrian villages of the occupied Syrian Golan are deprived of physical space for organic growth. In the village of Majdal Shams, approximately 11,000 Syrian citizens live in 1,200 houses. As new construction is not authorized, houses are either renovated or new floors are added, without the requisite permits, to accommodate the growth of these households. Syrian residents of the occupied Syrian Golan suffer from inequality regarding access to land, housing and basic services. The Citizenship Law continues to impact family ties for Syrians in the occupied Golan, which continue to be disrupted as a consequence of the territorys illegal annexation in 1981. High levels of taxes and restrictions on the use of water put a significant burden on Syrian farmers, who are thus in an unequal and disadvantaged position. Israeli settlements continued to receive the allotted share of 750 cubic metres of water per 1km2 of land, while the Syrian producers received 200 cubic metres. The cost of the water supply for agriculture to the Syrian farmers is approximately four times more than to the settlers. Water shortages usually result in the diversion of water resources to the settlements and, consequently, in some reduction of water provision to the Syrian farmers. In February 2013 Israeli media reported the intention
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of the Israel authorities to authorize drilling for oil in the occupied Golan Heights by issuing a license to prospect to a United States-Israeli energy company. CONCLUSION Israeli settlements in the Occupied Palestinian Territory and the occupied Syrian Golan not only are illegal but also constitute an obstacle to peace. The international community should exert all possible efforts to ensure the implementation of international law and relevant United Nations resolutions. These efforts should include providing support for initiatives that seek to end the Israeli violations of international law in the occupied territories, especially Israeli settlement activities, as a first step towards a final and just resolution to the conflict that ends the occupation and allows the attainment of the inalienable rights of the Palestinian people, as guaranteed by international law.

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