Steinitz threatens to stop PA tax transfers over UN bid

Finance minister: Abbas's statehood declaration is "a hostile move"; PA official says loss of US aid could lead to collapse of Authority.

September 21, 2011 10:05
1 minute read.

Finance Minister Yuval Steinitz 311. (photo credit: Courtesy: Ministry of Finance spokesperson)


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NEW YORK - Finance Minister Yuval Steinitz on Tuesday threatened severe financial ramifications if Palestinian Authority President Mahmoud Abbas makes good on a plan to request UN membership for a Palestinian state this week.

Steinitz said the government could stop collecting the 40 percent of the Palestinian Authority's budget through value added, excise and customs taxes.

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"It is my view, there is no government decision, that if the Palestinians violated the very fundamentals of the peace agreement, we should reconsider delivering tax money to them," Steinitz said in an interview with Reuters.

Taxes that Israel collects on behalf of the Palestinian Authority total about 500 million Israeli shekels ($135 million) a month, Steinitz said.

Steinitz temporarily stopped the transfer of the tax revenues last spring.

If Abbas makes his unilateral declaration, Steinitz said he hoped the attempt would fail, and he questioned whether the PA could run a stable state in which donations and international aid make up 40% of the budget.

"We are worried because of what we saw in Gaza," he said, referring to Hamas takeover of the Strip following Israel's withdrawal.

"We are worried because this is a hostile move," he said, adding that Israel wanted a peace based upon a bilateral agreement not a unilateral declaration.

The United States contributes $500 million in financial support annually to the PA. Some US politicians have said they will try to cut American aid to the Palestinians if they refuse to back down.

PA Monetary Authority Governor Jihad al-Wazir told Reuters on Monday that if the United States were to withdraw its aid, it could destabilize the PA.

"Really, the risk of a PA collapse is very real under the financial strain, without US assistance, without donor assistance in general," he said.

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