Ramallah – The stranglehold is gradually tightening on the most important financial resources of the Palestinian Authority. After a series of deductions from the “clearance” under various pretexts that totaled more than 7 billion shekels ($1.89 billion), an Israeli judicial decision was issued to withhold about 410 million shekels ($110 million) of them.
In the crossings and ports it controls, Israel, on behalf of the Palestinian Authority, collects customs on imported goods destined for the West Bank and Gaza, then transfers them to the Authority on a monthly basis in a process called “clearing.”
The freezing decision, issued this time through the judicial portal, is based on a law approved by the Israeli Knesset last March, and on October 22, the Israeli District Court ordered the freezing of the amount.
The decision came as a result of a lawsuit worth more than two billion shekels ($540 million) filed by Israeli families, members of which were killed in the attack by the Islamic Resistance Movement (Hamas) on the Gaza Strip on October 7, 2023. Freezing the funds guarantees compensation to the families if the court accepts them. In the end, the lawsuit.
The lawsuit stated that the authority – which did not participate in the attack, denounced it, and does not control the Gaza Strip – did not take measures “to thwart terrorist attacks, but rather financed terrorism and paid money to family members of terrorists.”
For years, Israel has continued to deduct money from the Palestinian Authority’s dues through political decisions, especially by the Minister of Finance in the current government, Bezalel Smotrich, and it has increased remarkably since the start of the Israeli aggression on Gaza, to an average of 400 million shekels per month (about 108 million dollars).
Government revenues
Palestinian government revenues are divided into 3 sources:
- Local revenues.
- Clearing revenues.
- Grants and external funding.
According to data from the Ministry of Finance of the Palestinian government on its website, the Palestinian government’s net revenues on a cash basis during the first eight months of the current year amounted to about 7 billion and 520 million shekels (about two billion dollars).
According to the financial statements, local revenues out of total revenues amounted to about 3 billion and 300 million shekels ($891 million). Of these, about two billion and 170 million shekels ($586 million) are tax revenues, while it was estimated Revenue Local non-tax fees amount to approximately 898 million ($236 million).
Non-tax revenues include fees and stamps on transactions and services for various ministries and government institutions, including health insurance fees, which included about 170 million shekels ($45 million) in the government budget in the first eight months of the current year.
Net clearing revenues amounted to about 4 billion and 220 million shekels ($1.13 billion).
While the total revenues from external grants amounted to 1 billion and 425 million shekels ($655 million), including 390 million shekels ($105 million) from Algeria, and about 490 million shekels ($132 million) within a Palestinian-European mechanism to support and manage social and economic aid.
According to the Palestinian Al-Iqtisadi website, tax revenues, government transaction fees, and clearing funds constitute 85% of the total Palestinian budget, with 10% being external grants and the rest being loans.
According to an analysis of the non-governmental website “Al-Iqtisadi” of financial data, the value of foreign grants and aid rose by 86% in the first 8 months of this year, compared to the corresponding period last year, in which foreign grants amounted to 767 million shekels ($207 million).
The total government expenditures during the same period amounted to 11 billion and 27 million shekels (two billion and 978 million dollars), including about two billion and 600 million shekels (702 million dollars) for the Ministry of Interior and National Security, and approximately two billion and 500 million shekels (675 million dollars) for the Ministry of Education.
Withheld funds
According to press statements by the Director of the Government Communications Office, Muhammad Abu Al-Rub, at the end of last week, about 7 billion shekels ($1.89 billion) of clearing funds are withheld by the Israeli side, including approximately 3 billion ($810 million) under the pretext that the authority pays an equal amount to the families of the prisoners. And the martyrs.
He pointed out that the financial crisis was not the result of the current government, but rather of previous governments, and that the government’s monthly obligations are not less than one billion shekels ($270 million), and yet today it is able to pay full salaries to about 70% of public sector employees.
Since November 2021, approximately 146,000 public employees in Palestine have been receiving reduced wages, due to the government’s inability to provide their entire monthly wage bill.
Regarding the cases filed before the Israeli courts against the Palestinian Authority, Abu Al-Rub said that their total value exceeds 3.5 billion shekels ($950 million).
Big debt
For his part, the expert and economic researcher Moayad Afaneh told Tel Aviv Tribune Net that the public debt of the Palestinian Authority, which is the outstanding balance of unpaid government financial obligations that it must pay in settlement of its obligations, whether to local or foreign banks or lending institutions, amounted at the end of last August to about 14.5 billion shekels (about 3.54 billion shekels). billions of dollars).
The most dangerous – according to the economic researcher – are its obligations towards employees, suppliers and various funds, where private sector arrears amount to $1.5 billion, and $1.5 billion are arrears to employees.
He said that the Authority borrows about 11 billion shekels ($2.97 billion) from the Pension Fund alone – which is a sovereign fund that is independent of the Authority.
He continued that the total obligations of the Palestinian Authority, including public debt, suppliers’ dues, and various arrears to the private sector, employees, and funds, amount to $11 billion.
Expanding revenues
According to the Palestinian researcher, it is possible to expand the revenues of the tax authority, specifically income and value-added taxes.
Here, he points out that the unorganized labor sector constitutes more than half of the labor sector in Palestine and is not subject to taxes, in addition to smuggling and customs evasion as a result of Israel’s control over about 61% of the West Bank.
He says – based on specialist estimates – that smuggling and tax evasion operations amount to 40% of tax revenues.
He added that the authority can also expand the revenue circle vertically by expanding income tax brackets to include those with wealth and not affecting marginalized segments.
He pointed to a plan to amend the Value Added Tax Law and the Income Tax Law in a way that improves tax revenues and reduces tax evasion and smuggling.