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The Manufacturers' Association of Israel is urging the government to deduct NIS 100 million in debts owed to Israeli factories by Palestinian businesses from tax and duties payments collected by the Israeli government on behalf of the Palestinian Authority.
The call came ahead ahead of Tuesday's government sitting regarding the issue of debt obligations owed by the Palestinian Authority to Israeli entities.
Until now, only a very limited number of Israeli bodies such as electricity, water, telephone and petrol companies were entitled to deduct the debts owed by the PA from tax funds which were transferred by the Israeli government. The deduction of PA debts from tax transfers allows the continuation of supply of electricity, water, fuel, food products, drugs and the hospitalization of Palestinian patients. However, following the rise of the Hamas government, Israel, in February, decided for the time being to suspend the transfer of taxes and customs duties of about $55m. it collected to the PA.
Yoram Blizovsky, managing director of the Manufacturers' Association, has asked the government to secure the repayment of debt to Israeli manufacturers by including the manufacturing sector in the group of bodies that are eligible for debt reduction through the PA funds that are in the hands of the Israeli government.
Blizovsky emphasized that the recent financial disengagement of Israeli banks from Palestinian banks, mainly due to the Hamas's classification as a terrorist organization, has only worsened the problem. Bank Hapoalim and Bank Discount were the two main banks and almost the only Israeli banks to keep financial transactions with the Palestinian Authority since the Paris Accords. This month Bank Hapoalim decided to cease any operations with Palestinian banks, whereas Bank Discount said that, as a result of Hamas's rise to power, it was reconsidering its ties with the Palestinian banks.
Despite deterioration of the political and security situation between Israel and the PA, Blizovsky said Israeli manufacturers have continued their business ties with Palestinian businesses.
In recent years, the Palestinian market has represented an important source of revenue for a number of Israeli companies. In 2005, sales from Israel to the PA rose by 10 percent to NIS 9 billion from the previous year, while manufacturing sales to the PA increased by 15% to NIS 2b., of which NIS 400m. were from food.