Israeli, Palestinian officials to launch talks on tax revenues dispute

PA backtracks, agrees to receive reduced tax funds.

PALESTINIAN AUTHORITY President Mahmoud Abbas (photo credit: OSMAN ORSAL/REUTERS)
(photo credit: OSMAN ORSAL/REUTERS)
In a sign that the Israeli-Palestinian tax feud might be winding down, the Palestinian Authority and Israeli officials are scheduled to meet on Sunday to discuss ways of resolving the dispute over payments made by the PA to security prisoners and families whose children were killed during attacks on Israelis.
On Friday, Hussein al-Sheikh, head of the PA’s General Authority for Civil Affairs, announced that a deal has been reached regarding the transfer of tax revenues collected by Israel on behalf of the Palestinians.
Under the terms of the deal, Israel will transfer to the PA NIS 1.5 billion from the tax funds.
In February, Israel began cutting the amount that the PA pays to the prisoners and families of “martyrs” from the tax revenues. The PA, in return, has refused to receive the reduced tax funds from Israel, insisting that the money be paid in full.
The PA’s refusal to receive the tax revenues triggered a financial crisis that resulted in its employees receiving only 50%-60% of their salaries.
A senior PA official said on Saturday that the transfer of the tax funds will allow the PA government to pay full salaries to its employees.
“The crisis is still not over,” the official cautioned. “This is a partial solution. We agreed to receive the tax revenues only after Israel accepted our demand to activate the joint committees.”
PA leaders said in recent months that they will continue to reject the transfer of the tax revenues as long as Israel continues to deduct the amount paid to the prisoners and the families of “martyrs.” Israel plans to continue to deduct those payments.
A Finance Ministry spokeswoman said the ministry had been prepared to transfer the remainder of the tax revenues each month since February, but that this is the first time the PA has agreed to accept the money. She added that the joint committee has been meeting regularly to discuss financial matters.
The turnabout in the PA’s position came after a meeting last Thursday between Sheikh and Finance Minister Moshe Kahlon.
“We agreed to activate the joint committees between the two sides to resolve all outstanding financial issues,” Sheikh said, adding that the talks will begin on Sunday.
He said that despite the agreement to transfer the tax revenues to the Palestinians, the dispute over the payments made by the PA to the prisoners and families of “martyrs” remains unresolved.
According to the PA official, the joint Israeli-Palestinian “technical committees” will discuss “changing mechanisms of the tax revenue collected by Israel.”
“Since 2000, the Israeli government has been conducting illegal deductions from the funds of our people,” Sheikh said. “For the first time since then, the joint technical committees will start meeting tomorrow to discuss all the files, change the mechanisms and demand the return of all our financial rights.”
Palestinian officials in Ramallah on Saturday described the deal with Israel as an achievement for the PA. They said the resumption of the meetings of the joint “technical committees” would allow the Palestinians to demand changes in the Protocol on Economic Relations, also called the Paris Protocol, signed between Israel and the PLO in September 1995.
The Paris Protocol regulates the relationship and interaction between Israel and the PA in six fields: customs, taxes, labor, agriculture, industry and tourism.
The Paris Protocol allows Israel to collect and transfer to the PA the import taxes on goods intended for the West Bank and Gaza Strip.
“The Palestinian leadership has succeeded in extracting [from Israel] the decision to activate the work of the joint committees in accordance with the Protocol on Economic Relations,” said Ahmed Majdalani, a senior PLO official. “That will allow the Palestinian Authority, for the first time since 2000, to follow up all economic issues and review and check all the funds that Israel deducted.”
Majdalani said the PA will raise during the meetings of the joint committees all the deductions made by Israel in the past two decades, including Palestinian debts to the Israel Electric Corporation and Israeli hospitals.
The resumption of the work of the committees, he added, aims to pave the way for the Palestinians to disengage from the Israeli economy and review the terms of the Paris Protocol.
Majdalani said that despite the deal with Israel, the PA leadership “remains morally and nationally committed to the families of prisoners and martyrs.”
Palestinian economist Samir Abdullah told the PA’s Voice of Palestine radio station that the reactivating of the joint committees will pave the way for the Palestinians to raise the issue of Israel’s “non-compliance” with many of the provisions of the 1995 agreement.
Because the committees didn’t meet in the past two decades, the Palestinians were unable to hold Israel accountable, Abdullah added.
Another Palestinian economist, Samir Hulileh, also expressed hope that the renewed work of the joint committees would pave the way for changing some of the provisions of the Paris Protocol, especially in the fields of finance, agriculture, tourism, and insurance.
He further expressed hope that during the meetings the Palestinians would receive permission to import oil from Jordan.
Meanwhile, Hamas criticized the tax revenues deal and said it shows that the PA leadership is not serious about its decision to terminate all signed agreements with Israel.
“The meeting between Hussein al-Sheikh and Moshe Kahlon affirms that the decision to suspend agreements between the Palestinian Authority and the occupation is not worth the paper it’s written on,” said Hamas spokesperson Hazem Qassem. “The Palestinian Authority’s retraction encourages the occupation to carry out more aggressions against our people and confiscate and annex our lands in the West Bank.”
Qassem claimed that the “personal interests” of some PA leaders were stopping them from taking any decision against Israeli policies.
The PA decision to accept the tax revenues comes fewer than two weeks after the New York meeting of the Ad Hoc Liaison Committee in New York, in which donor countries and organizations urged the Palestinians and the Israelis to find a way to resolve the revenue crisis, which has threatened to bring about the financial collapse of the PA.
According to the World Bank, the PA faces a possible financing gap of over $1.8 billion this year. Tax revenues make up 65% of the PA’s budget.
In August, the PA agreed to a one-time transfer of $570 million in revenues from the fuel tax.
Tovah Lazaroff contributed to this report.