Israel to transfer withheld tax revenue to Palestinians

January 30, 2013

Israeli Prime Minister Benjamin Netanyahu has decided to transfer withheld taxes and customs duties collected last month for the Palestinian Authority to ease the deepening financial crisis there, his spokesman said Wednesday.

The transfers were suspended last month in response to the successful bid by the Palestinians to upgrade their status at the United Nations to that of a “non-member observer state.” Israel had come under growing international pressure to renew the transfers, and the decision followed a meeting Tuesday between Netanyahu and Tony Blair, the representative of the international Middle East mediating group known as the Quartet.

Netanyahu’s spokesman, Mark Regev, said that the handover of last month’s taxes was a one-time move and that no decision had been made yet about further transfers, which are normally made monthly. Officials from both sides were scheduled to meet Wednesday to calculate the amount of revenue to be transferred.

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. Since the Israeli sanctions were imposed, the authority has been struggling to pay the salaries of its 150,000 workers, some of whom have gone on strike in response.

A statement Tuesday by the Palestinian cabinet, issued before Netanyahu’s decision, called the tax transfer freeze “Israeli piracy” and promised to pay the remaining half of November salaries in two days, “if work is resumed in the ministries, at the least by those responsible for executing salary payment procedures.”

The statement urged Arab states to make good on promises to provide a financial safety net to make up for the shortfall caused by the Israeli sanctions. The authority had already been contending with a falloff in donor funding from Western and Arab countries.

Israel has halted the transfer of tax revenue to the Palestinian Authority several times in the past as a form of punishment. This time the funds were diverted to meet a debt owed by the Palestinians to the Israel Electric Corp.

The revenue includes 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.

Israel has walked a fine line while imposing financial sanctions on the Palestinians because it does not want to see a collapse of the Palestinian Authority, with which it cooperates on security matters and which has taken on governing tasks formerly handled by the Israelis.

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