Israel will withhold NIS 450 million in tax revenues that were to be transferred to the Palestinian Authority and use the money to offset debts to Israel, Israel’s finance minister said Sunday.
The move will likely be seen as a punitive measure against the Palestinians for their successful bid Thursday to upgrade their status at the United Nations to nonmember observer state.
Finance Minister Yuval Steinitz confirmed that he would hold back NIS 450 million to offset a NIS 800 million debt owed by the PA to the Israel Electric Corporation.
Israel had threatened before the vote to take measures against the Palestinians, listing the withholding of tax money to offset the electricity debt as an example. The approval of 3,000 housing units in East Jerusalem and the West Bank over the weekend was also seen as a response to the UN upgrade. That move has been widely condemned as damaging the peace process
The Palestinian Authority owes over NIS 1 billion to Israel, according to Israel Radio.
Palestinian Authority President Mahmoud Abbas’s diplomatic advisor Nimar Hamad called the Israeli decision “theft.” He said that the issue of Palestinian tax monies had nothing to do with the UN move and that he hopes the Arab states will make good on their pledge to transfer $100 million to the Palestinian Authority.
Senior Palestinian negotiator Saeb Erekat called the move “financial piracy,” and urged Israel to stop repeating its mistakes. Israel has frozen payments to the Palestinian Authority before, notably a year ago after UNESCO granted the Palestinians full membership.
“The provocation is by the Palestinians,” Steinitz told Channel 10 news on Sunday morning, saying that the PA was attempting “to promote a state without recognizing Israel, demilitarization or security arrangements.”
Two weeks before the UN vote, Stenitz said that Israel would not collect taxes on the Palestinians’ behalf, nor deliver the money to the PA or assist Ramallah in economic matters, if the Palestinians insisted on seeking nonmember observer state status at the UN.
Despite economic leaps in the last several years, the Palestinian economy is still largely beholden to foreign aid and tax revenue collected by Israel. The lack of tax money for a month will likely hurt Ramallah’s ability to pay worker salaries or provide other services.
Steinitz also dismissed the UN’s decision to grant the PA nonmember observer status. “There will be no Palestinian state until Israel is recognized as a Jewish state with a resolution ending the conflict. Israel will not allow Judea and Samaria to become a terrorist base from which rockets launched at Israeli cities.”
Ilan Ben Zion contributed to this report.