Palestinian Authority officials said Wednesday they returned all the tax money Israel collected this month on their behalf, after Israel withheld part of the sum equivalent to the amount paid by the PA to convicted terrorists detained in Israel.
Under the 1994 Paris Protocol, which established a customs union between Israel and the Palestinian Authority, Israel is supposed to collect value-added tax, import duties and other taxes on the PA's behalf and hand them over on a monthly basis.
Israel controls all international crossings, meaning the PA cannot have any independent import or export arrangements. Withholding funds contravenes the Paris Protocol.
This is the first time Israel is implementing a law passed in July 2018 that calls to freeze 500 million shekels ($138 million dollars) from the total sum that is due to be delivered to the PA. The 500 million will be deducted from the hundreds of millions of shekels that Israel transfers each month to the PA in taxes that it collects on its behalf.
In mid-February, the security cabinet passed a resolution that put the 2018 law into effect. The 2018 law calls to freeze the funds in order to offset the money the PA pays convicted terrorists detained in Israel and to their families and released prisoners.
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According to data presented by defense officials, the PA each year transfers 1.2 billion shekels ($333.3 million) to security prisoners and their families, constituting 7 percent of the PA’s budget.
Outgoing Palestinian Authority Prime Minister Rami Hamdallah said that Israel withheld 40 million and 800,000 shekels ($11,282) out of the 700 million shekels ($193 million) it collected this month, which is why the PA refused to receive any of the money.
Hamdallah said that despite returning the funds, the PA is still committed to the prisoners' families that are waiting for the money.
PA President Mahmoud Abbas said earlier this month that the Palestinians would not accept any money from Israel if any sum at all is deducted. “Either we get all our money and rights, or we won’t get anything. If they deduct some of it, they can deduct all of it,” Abbas told a Palestinian leadership meeting in Ramallah.
Palestinian Civil Affairs Minister Hussein al-Sheikh and Palestinian Finance Minister Shukri Bishara said the PA will face difficulty paying the salaries of public servants in February.
As Haaretz's Amos Harel wrote, the murder of Ori Ansbacher in Jerusalem earlier this month led to renewed discussion of the assistance the PA gives to terrorists and their families; the overcrowding on the right side of the political spectrum did the rest. When Naftali Bennett and Avigdor Lieberman are circumventing Prime Minister Benjamin Netanyahu on the right on the question of relations with the Palestinians, and the prime minister is busy branding himself as the strong right against Benny Gantz’s weak left, Netanyahu saw no choice but to start implementing the law.
Between July and February nothing was done about deducting any taxes
The law stipulates that every year the defense minister will submit to the security cabinet a report summarizing the transfer of funds from the PA to prisoners and their families. This sum will be divided by 12, and the result will be withheld from the subsequent monthly transfers of taxes Israel makes to the PA.
The freezing of tax money is a method Israel uses many times as sanctions against the Palestinians. In this instance, the transfer of the funds goes against the Oslo Accords and violates a unified tax policy Israelis and Palestinians have agreed upon. In all previous cases in which Israel took this step, it walked back on the move following understandings it reached with the Palestinians.
The new Israeli legislation was met with harsh response from Palestinian officials. Speaking to Voice of Palestine radio, Issa Qaraqe, head of the Prisoners' Commission, said at the time that the funding freeze is "theft and piracy of Palestinian money as well as an arbitrary and racist law."