Israeli Knesset approves law to deduct funds from Palestinian tax revenues

Clearance revenues are taxes imposed on goods imported into the Palestinian side, whether from Israel or through border crossings controlled by Tel Aviv, which Israel collects on behalf of the Palestinian Authority.

However, beginning in 2019, Israel decided to deduct sums from these revenues under various pretexts, causing a financial crisis that left the authority unable to pay its employees' salaries in full.

The Knesset said in a statement on Tuesday that the plenary approved, in the second and third readings on Monday, a bill to freeze clearance revenues. With approval in the second and third readings, the proposal has become law.

The Knesset said the bill stipulates “the deduction of an amount from the funds transferred by Israel to the Palestinian Authority each year, as determined by the Ministerial Committee for National Security Affairs, with the amount determined based on a report submitted by the Finance Minister (Bezalel Smotrich).”

Over the past several years, Israeli courts have ordered the Palestinian Authority to pay compensation worth tens of millions of dollars to Israelis who claim to have been harmed by Palestinian attacks.

While Smotrich has been deducting these compensation payments from clearance revenues, this law turns the deductions into legislation rather than merely ministerial instructions.

Last month, Palestinian Prime Minister Mohammad Mustafa accused Israel of “suffocating” the West Bank through “political, security, and colonial tools, in addition to the continued deduction of Palestinian clearance revenues.” “

These deductions have escalated over the past 12 months, as Israel has not transferred any tax and customs revenues to the state treasury,” he said.

Under the Paris Economic Protocol, an annex to the Oslo Agreement signed in 1994 between Israel and the Palestinian Authority, the Israeli Ministry of Finance collects clearance revenues at border crossings.

In return for this collection service, Israel receives 3 percent of the total deducted clearance revenues, whose annual value reaches approximately 380 million shekels ($102 million).