Ministers set to vote on PA tax transfers amid mounting opposition to Smotrich freeze
Finance minister accused of seeking to ‘inflame’ West Bank by withholding millions, as Netanyahu, Gallant reportedly back handing over cash to help avert escalation of violence
A standoff within the government over Finance Minister Bezalel Smotrich’s refusal to transfer tax revenues to the Palestinian Authority was set to come before the security cabinet on Thursday, with a majority of ministers reportedly expected to defy the treasury chief and authorize sending the money to Ramallah.
Smotrich halted the transfer of customs duties collected by Israel on behalf of the PA earlier this week and urged the government to reevaluate its policy on such funds in light of what he claimed was the PA’s support for Hamas’s October 7 terror onslaught.
Defense Minister Yoav Gallant opposes the freeze, as does Washington, seeing the money as crucial to keeping the PA afloat amid challenges to its rule by armed groups in the West Bank. Prime Minister Benjamin Netanyahu also reportedly favors keeping the monthly transfers in place, which make up nearly 65 percent of the Palestinian annual budget.
Due to the PA’s lack of statehood status, Israel is responsible for collecting customs duties and other tax revenues on its behalf. Israel has made deductions in the past based on 2018 legislation that allows it to offset the PA’s payment of stipends to terrorists and their families. But it only partially upholds the policy, as officials are keenly aware that the PA is dangerously close to financial collapse.
On Monday, Smotrich informed Netanyahu that he had told the Treasury to halt this month’s transfer. He requested that the cabinet discuss Israel’s policy of transferring funds collected on behalf of the Palestinian Authority — as set out by the Oslo Accords — in light of “senior PA officials’ support for the horrific massacres of the Nazi terrorist organization Hamas.”
The PA has avoided condemning the October 7 Hamas onslaught, in which terrorists from Gaza rampaged in southern Israel, brutally murdering 1,400 people, mostly civilians, and kidnapping at least 247 others. Israel has responded with intensive strikes on Gaza and a gradually expanding ground operation, declaring its intention to eradicate the terror group that rules the Strip.
Instead, Ramallah has made vague pronouncements about protecting civilians on both sides, while harshly decrying Israel’s military offensive.
Smotrich cited what he said were inflammatory statements by the PA since the massacre, but on Wednesday Gallant said Israel should still transfer the frozen funds to the PA.
“It is appropriate to transfer, and transfer immediately, the funds to the Palestinian Authority so that they will be used by its forces who help prevent terrorism,” he said at a press conference.
Washington has also pushed back against Smotrich’s announcement.
Ministers may still vote to withhold some $100 million to offset monthly PA transfers to the Gaza Strip, which are intended to pay for electricity and water in Gaza, medical treatment for Gazans in Israel and the West Bank, and salaries for Fatah officials in the Strip, according to the Ynet news site.
Ynet quoted several unnamed senior officials blasting Smotrich, a hardliner who leads the far-right Religious Zionism party.
“We expect the Palestinian security forces to operate against Hamas in the West Bank and to preserve law and order in Palestinian cities. This can’t be done without receiving salaries,” a security official said, warning that an escalation of violence in the West Bank could harm war efforts in Gaza and in the north.
An unnamed senior cabinet official was quoted as saying that the “Americans are horrified by what Smotrich is doing,” accusing him of trying to “inflame” West Bank tensions.
According to a Channel 12 news report Wednesday, Netanyahu was criticized during a meeting of a ministerial economic panel for appearing to suggest that Israel pay a form of unemployment benefits to thousands of Palestinian workers from the West Bank unable to cross into Israel for work during the ongoing war.
According to quotes aired by the network, Netanyahu cited warnings by security officials that failing to provide compensation for the lost work could create tensions and increase motivation to carry out terror attacks, and suggested making advance payments.
Ministers vocally objected, including Nir Barkat and Smotrich, and Netanyahu clarified that foreign countries would make the payments, according to the report.
Netanyahu has long argued for Palestinian economic prosperity as a basis for Israeli-Palestinian amity in place of conflict.
His governments have been careful not to carry out harsh penalties against the PA, over fear that its collapse would create chaos and a power vacuum in the West Bank and serve as an opportunity for terror groups to seize control, similar to the situation in Gaza where Hamas violently ejected the PA in 2007.
Despite acrimonious relations, Israel also continues to cooperate with Ramallah on security matters, cooperation defense officials say has helped prevent terror. The Shin Bet, Washington and the EU have all been reported to be warning Israel that the West Bank is at boiling point.
The PA has increasingly lost control over the northern West Bank, empowering terror groups, and spurring Israeli forces to carry out regular operations in the area.
In July, the security cabinet voted in favor of a series of steps to bolster the PA, including the approval of a new industrial zone in Tarqumiyah, near the southern West Bank city of Hebron, a move long supported by Israeli security officials, and the extension of hours at the Allenby border crossing with Jordan.
Carrie Keller-Lynn and Jacob Magid contributed to this report.
