Israel restores tax transfers to Palestinians after Obama visit

March 25, 2013

Israeli Prime Minister Benjamin Netanyahu has authorized a resumption of the monthly transfer of taxes and customs duties collected by Israel for the Palestinian Authority, his spokesman said Monday, providing badly needed relief for the cash-strapped Palestinian government in the West Bank.

The move, coming days after a visit by President Obama, reverses an Israeli decision to suspend the regular tax transfers as punishment for the successful Palestinian bid in November to become a nonmember observer state at the United Nations.

During his visit, Obama pressed for a resumption of Israeli-Palestinian peace talks, and Israeli media said he and Secretary of State John F. Kerry, who held follow-up meetings with Netanyahu and Palestinian Authority President Mahmoud Abbas, called for confidence-building measures to help restart negotiations.

Mark Regev, a spokesman for Netanyahu, said at the end of Obama’s visit that Israel was prepared to carry out such steps, provided the Palestinians did the same.

The taxes and customs duties handed over by Israel, about $100 million a month, amount to two-thirds of the Palestinian Authority’s domestic revenue. The authority has been struggling to pay salaries to about 150,000 employees because of disruptions in the Israeli transfers and a falloff of funds from foreign donors, particularly from Arab states.

Teachers, health workers and other Palestinian civil servants have staged strikes over their salary arrears.

Israel released Palestinian tax funds collected in December and January to avert a deepening of the fiscal crisis, but the overall suspension of the regular transfers remained in force until Netanyahu’s decision was announced Monday.

Although Israel has suspended tax transfers in the past as a punitive measure against the Palestinians, it has also sought to avert a collapse of the Palestinian Authority, with which it has effective security cooperation that has led to a sharp drop in attacks on Israelis.

The tax transfers include customs duties that Israel collects on behalf of the Palestinian Authority for imports coming through Israeli ports, value-added taxes levied on large Palestinian purchases of Israeli goods, and excise taxes on fuel sold to the Palestinians. The funds are transferred under an economic agreement that followed the 1993 Oslo accords between Israel and the Palestinians.

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