The Palestinian Authority is losing about $300m (£193m) a year in "leakage" of customs, purchase and value-added taxes which are not transferred to the Palestinian treasury by Israel, according to preliminary UN estimates (pdf).

The UN conference on trade and development (Unctad) defines fiscal leakage as Palestinian fiscal revenue destined for the PA but retained by Israel instead. Palestinian trade taxes consist of purchase tax and VAT, levied on all imports, whether they originate from Israel or elsewhere, as well as additional excise tax and custom duties on imports from sources other than Israel.

Mahmoud el-Khafif, co-author of the preliminary report, said initial figures were higher but were revised when challenged by the Bank of Israel. "These are very conservative estimates," he said emphasising that this fiscal loss is from two sources only. "We focused on leakages from indirect imports – goods produced in a third country, imported to Israel and sold on to Palestine. The second leakage is from smuggling."

The report says the losses do not include the revenue leakages from many other sources, including taxes levied by Israel on incomes of Palestinians working in Israel and settlements; revenue loss from under-pricing imported goods in invoices due to lack of Palestinian control over borders and access to proper trade data; revenue loss related to lack of control over land and natural resources; financial resources loss related to goods and services imported through the Palestinian public sector (petroleum, energy, and water); and fiscal loss as a result of the smaller tax base caused by the destruction of the productive base and loss of natural resources to occupation.

According to the protocol on economic relations, or Paris protocol, signed in 1994 by Israel and the Palestine Liberation Organisation, any product wholly produced in Israel or has more than 40% of Israeli value added is exempt from customs duties, but subject to VAT and purchase tax.

Unctad, however, says not all Palestinian imports from Israel are goods produced in Israel or meet the rule of origin. It also says a significant portion of these imports are produced in a third country. These are cleared as Israeli imports before being sold in the occupied Palestinian territory as if they had been produced in Israel.

Customs revenue from these indirect imports is collected by the Israeli authorities but not transferred to the PA, as they are not labelled as being destined for the occupied Palestinian authority and are imported by Israeli importers and resold to Palestinian consumers.

Unctad estimates that about $115m of revenue from direct and indirect imports from Israel were not transferred to the PA in 2010 and 2011.

Smuggling is another source of significant fiscal revenue loss. Where the smuggled goods are produced in Israel, the PA loses VAT and purchase tax revenue.

Where goods are produced in a third country, tariff revenue is also leaked along with VAT and purchase tax revenue. By adding up the leakage from total imports and smuggling from Israel, Unctad estimates the total as more than $300m a year.

The estimated costs to the PA of the $300m leaked annually to Israel is equivalent to 17% of total tax revenue, in addition to 4% in lost GDP and about 10,000 jobs a year. If the leakage could be curtailed, and the money transferred from the Israeli treasury to the Palestinian treasury, the resulting increase in revenue would help to expand economic growth and employment, says Unctad. The gross domestic product of the occupied Palestinian territory would therefore increase by 4% and employment would increase by 10,000 jobs per year, the report contends.

Unctad says foreign aid has masked the impact of the measures imposed by Israel. However, with the decline of such support and the subsequent global economic crisis, the severe impact of the occupation on Palestinians is becoming clearer. The economic impact was most pronounced in Gaza, where growth fell from 21% in 2011 to 6.6% in 2012. The decline is concentrated in Gaza's agricultural and fishing sector, which has been directly affected by Israeli military action in Gaza in last November.

In March, Israel announced it would resume the regular transfer of about $100m a month to the PA after withholding the tax revenues it collects on behalf of the Palestinians as a punitive measure following last November's statehood recognition at the UN. The move came before the resumption of peace negotiations last month.

The report recommends changes to the Paris protocol, so that it is a more balanced framework "consistent with Palestinian sovereignty needs for economic, fiscal and policy independence". The report also recommends that the PA has full access to all data related to imports from or via Israel when the final destination of goods is the occupied Palestinian territory. It also suggests the abolition of existing time restrictions, that prevent the PA from claiming due revenue.