Palestinians agree to some tax transfers from Israel as cash crunch mounts
PA to take in around NIS 2 billion in money from fuel taxes while Ramallah attempts to deal with shortfalls amid dispute over terror payouts
RAMALLAH, West Bank — The Palestinian Authority, in deep financial trouble since February over a tax crisis, said Thursday it had accepted a partial payment of just over half a billion dollars after reaching an agreement with Israel.
“An agreement was reached a few days ago with the Israeli side for transferring duties on oil and fuel which the Palestinian Authority bought in Israel to the amount of around two billion shekels ($568 million),” Civil Affairs Minister Hussein al-Sheikh told AFP.
The PA has seen its coffers shrink since cutting off tax transfers from Israel in February to protest Israel garnishing the transfers to offset payments to terrorists and their families. Israel says the policy encourages further violence, while PA President Mahmoud Abbas has insisted he receive all or nothing.
The money covers taxes on fuel that previously were routed through Israel, which collects some $190 million on taxes a month on behalf of Ramallah.
“Recovering this money will solve part of the financial crisis caused by the Israeli government’s freezing of Palestinian funds,” said Sheikh, while stressing that it was only part of the arrears due from Israel.
Sheikh said the underlying political dispute had not been resolved, as the PA insisted that it would continue to pay allowances for Palestinian prisoners and the families of those killed in conflict with Israel down to the “last cent.”
He said that representatives of Israel’s Defense Ministry were present during the recent negotiations.
Israel sees the stability of the West Bank as essential to its own security.
Observers are concerned that economic distress in the territory could feed radicalization of young Palestinians, already embittered by the lack of visible prospects for peace.
Official Palestinian figures show that about 30 percent of the West Bank population is aged 15-29.
Such considerations will be key in the calculations of the Israeli government as it heads for what will probably be a tough fight for reelection in a September 17 poll.
World Bank data shows that gross domestic product “barely” grew at all in 2018 in the West Bank and the Gaza Strip — a Palestinian enclave ruled by Islamist terror group Hamas — with unemployment at as high as 50% in the Strip, and at around 30% in the West Bank.
Abbas had accused Israel of blackmail through its withholding of funds, insisting on the full amount, which accounts for around 65% of PA revenues.
The money comes from customs duties levied on goods destined for Palestinian markets that transit through Israeli ports.
On Monday Abbas fired all of his advisers over the financial shortfall.
The PA has already cut salaries for most of its tens of thousands of employees by half to keep the government afloat.
On top of the tax dispute with Israel, the United States has cut more than $500 million in aid to Palestinians via various programs.
That came after Abbas announced a freeze in relations with Washington in protest at US recognition of Jerusalem as Israel’s capital.