PA Accepts $1 Billion in Tax Revenue Funds From Israel
US election results, regional changes led Israel and the Palestinians to work things out after six months of no cooperation, analysts say
The Palestinian Authority can pay its 130,000 employees their full salaries for November – for the first time in six months, after receiving from Israel on Wednesday more than $1 billion in tax duties collected on its behalf. It is the first time that the tax revenue has been transferred since June, when the PA halted security cooperation and the monthly financial transfers over Israeli plans, now suspended, to annex parts of the West Bank.
The PA announced that it had resumed security cooperation with Israel on November 17.
For more than two decades, Israel has collected the so-called clearing funds on behalf of the PA, for a 3% commission as specified in the 1994 Protocol on Economic Relations, also called the Paris Protocol. This money consists of taxes on imports to the Palestinian territories as well as income taxes paid by Palestinians working in Israel.
PA Civil Affairs Minister Hussein al-Sheikh announced on Twitter that the Israeli government transferred the full amount owed of 3.77 billion shekels ($1.14 billion) in tax and customs revenue, without any deductions.
This despite the fact that on Sunday, Israel’s Cabinet decided to deduct 600 million shekels ($180 million) from the tax revenues, but it did not do so, Sheikh said.
In July 2018, Israeli lawmakers approved a law that allows the government to withhold tax revenue from the Palestinians equal to the amount paid as monthly stipends to security prisoners in Israeli prisons and to the families of Palestinians who died in violent encounters with Israelis.
Mohammed Salameh, a Palestinian financial expert, told The Media Line the news indicates that a large amount of cash will enter the Palestinian economy. “We are talking about more than $1 billion, approximately,” he said.
After this money is distributed, it will naturally increase demand and revive the economy, Salameh added.
“A lot of problems will be solved; people in debt will be able to meet their commitments. And people whose lives have completely changed, especially with the coronavirus pandemic, will see light at the end of the tunnel,” he said.
The renewed flow of tax revenue will have a huge impact on the Palestinian economy, not only in terms of renewing trade, but also in investment, Salameh explained. “It’s like someone who has lost a great deal of blood, and you give him a transfusion. These sums will lead to a noticeable revival of the Palestinian economy,” he said.
The banking sector will be energized as deposits increase and institutions’ abilities to lend will increase accordingly. In addition, loans will be repaid, he said. “This will create healthy economic activity in the country, which is very important,” he added.
The PA was unable to pay government employees’ salaries for May, and has been paying half salaries ever since due to the leadership’s refusal to accept the tax monies, which comprise 60% of the PA budget.
A lot of problems will be solved; people in debt will be able to meet their commitments. And people whose lives have completely changed, especially with the coronavirus pandemic, will see light at the end of the tunnel
Dr. Gil Feiler, a senior research associate at the Begin-Sadat Center for Strategic Studies at Bar-Ilan University, near Tel Aviv, told The Media Line that Israel forwarded the tax revenue to maintain stability in the West Bank, taking into consideration the COVID-19 crisis. “A few months ago, Israel already transferred some money to the PA as emergency coronavirus assistance,” he said.
The PA was the one that had refused to receive the payments in part because of the Israeli decision to deduct from the full amount, and it has now forwarded these funds as well, Feiler said. The question is why now, he asks.
Feiler said that US President-elect Joe Biden’s administration will definitely take a different direction than the Trump Administration vis-a-vis the Israeli-Palestinian conflict, “and it’s clear that both sides, Israel and the Palestinians, will have to make changes. The first sign of this came a few weeks ago, when the Palestinians resumed security coordination with Israel.”
Both sides are trying to demonstrate goodwill, he said. “Israel in any case has to send these monies to the PA; why not now? Also, [PA President Mahmoud] Abbas wants to show President-elect Biden, and Europe as well, that he’s prepared to do business, and for the resumption of talks and negotiations,” Feiler said.
Ayman Yousef, a political science professor at Arab American University in Jenin, in the West Bank, told The Media Line that while the Israeli actions in transferring the clearing funds related to the stability of the PA’s economy, the political considerations are even more important.
“This news came after Trump was defeated in the election, where a Democratic administration is coming that promises to bring the subject of negotiations back to the table, in addition to the Arab normalization with Israel and the Arab openness to Israel,” Yousef said.
Israel is trying to show the incoming Biden Administration not only that it is eager to improve the Palestinian economic situation and the stability of the PA, but also the importance of returning to negotiations with the Palestinians, he said.
“And there is a Palestinian response to that, where maybe they climbed out on a branch for a while, but there are now new arrangements and political changes in the US and in the region, as well as locally related to the economic situation and the [PA] government employees’ salaries, especially amid a lack of real options for the Palestinians, including on the issue of reconciliation” between Fatah/the PA in the West Bank, and Hamas in the Gaza Strip, Yousef said.
As for that Palestinian reconciliation, he said it would take time and that there were still conflicting and unclear views on the subject. “I think that the reconciliation issue has retreated to the back burner, where it has perhaps become the second or third issue in terms of importance on the Palestinians’ agenda. There’s friction [on the issue] inside Fatah and inside Hamas,” he said.
The latest Israeli and Palestinian moves might set back the reconciliation process if the Palestinians do not hold long overdue elections within six months, Yousef also said.
Hazem Qassem, a Hamas spokesperson in Gaza, told The Media Line that Israel will still deduct the 600 million shekels from the clearing funds, in installments of about 50 million shekels per month, starting at the end of December.
“The PA’s resumption of security coordination with the occupation [Israel] formed a contradiction to the approach of all Palestinian factions, as they expressed during the meeting of the secretaries-general [of the Palestinian factions] in Beirut and Ramallah” held via videoconference on September 3, Qassem said.
The basis for the Palestinian division was the PA’s political direction, where it has insisted on “the resumption of negotiations and security coordination with Israel, while the occupation continues with settlements, violations in Jerusalem and the siege on Gaza,” he said.
Qassem stressed that the PA’s position has weakened the Palestinian position in general. “The cutting of ties with Israel revived relations between the PA, Fatah and all of the Palestinian factions. Now the return to security coordination has reinvigorated the causes of division in the Palestinian arena,” he said.
“It’s a real and painful blow to Palestinian reconciliation, and the clearing funds are a Palestinian right. The occupation is stealing part of it, and unfortunately the PA with its weak stance has encouraged the occupation to deduct 600 million shekels,” Qassem said.